PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES

Public Bill Committee

SAVINGS ACCOUNTS AND HEALTH IN PREGNANCY GRANT BILL

Fourth Sitting Thursday 4 November 2010 (Afternoon)

CONTENTS Examination of witnesses. CLAUSE 1 under consideration when the Committee adjourned till Tuesday 9 November at half-past Ten o’clock.

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The Committee consisted of the following Members:

Chairs: †MR GEORGE HOWARTH,MR GARY STREETER

† Baldwin, Harriett (West Worcestershire) (Con) † McCarthy, Kerry (Bristol East) (Lab) † Brown, Lyn (West Ham) (Lab) McGovern, Alison (Wirral South) (Lab) † Bruce, Fiona (Congleton) (Con) † Maynard, Paul (Blackpool North and Cleveleys) † Fovargue, Yvonne (Makerfield) (Lab) (Con) † Gilmore, Sheila (Edinburgh East) (Lab) † Newton, Sarah (Truro and Falmouth) (Con) † Goodwill, Mr Robert (Scarborough and Whitby) † Perry, Claire (Devizes) (Con) Ritchie, Ms Margaret (South Down) (SDLP) (Con) † Sharma, Alok (Reading West) (Con) † Green, Kate (Stretford and Urmston) (Lab) † Williams, Stephen (Bristol West) (LD) † Hanson, Mr David (Delyn) (Lab) † Hemming, John (Birmingham, Yardley) (LD) Sarah Davies, Sarah Thatcher, Committee Clerks † Hoban, Mr Mark (Financial Secretary to the Treasury) † attended the Committee

Witnesses

Dr Samantha Callan, Chairman in Residence, Centre for Social Justice

Tony Dolphin, Senior Economist, Institute for Public Policy Research

Sian Williams, Head of Financial Inclusion, Toynbee Hall

Mr Mark Hoban, Financial Secretary to the Treasury

Matthew Little, Bill Manager 101 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 102 Pregnancy Grant Bill were out of their domain and that contributing to Public Bill Committee savings was an impossible dream. It actually helped people move on to a place where they could see that Thursday 4 November 2010 something tangible was being formed and they could put that aside for their children. In terms of behavioural economics, it was a very important programme. While I (Afternoon) would say that not every family contributed and not every child’s trust fund was being built up on an equal basis, every child was benefiting. [MR GEORGE HOWARTH in the Chair] My real concern around the removal of the child trust fund is not across the whole population; it is for Savings Accounts and Health in the lowest income groups. We really believe that, for Pregnancy Grant Bill that particular income group, from 16 to 18 years was a really important time to have no assets to fall back on. 1pm That really puts people in a difficult position. It reduces their opportunities, and we think the child trust fund The Committee deliberated in private. was really effective in tackling that.

1.2 pm Q252 Mr Hanson: Mr Dolphin or Dr Callan, do you On resuming— dissent from that view in any way, shape or form? Tony Dolphin: Certainly not. I would agree, but I The Chair: I welcome the witnesses who have kindly have a couple of points. First, we have to remember that agreed to give evidence today. It would be helpful if you the child trust fund is still in its infancy. The oldest could introduce yourselves individually before we commence accounts have been open for only eight years and one the proceedings. eighth of all accounts have been open for less than a Sian Williams: I am Sian Williams from Toynbee year. Looking at the aggregate numbers of people who Hall. have saved into them could be misleading at this stage, Tony Dolphin: I am Tony Dolphin. I am the senior because many of these accounts have not been open for economist at the Institute for Public Policy Research. very long. If the programme had been allowed to build Dr Samantha Callan: I am Samantha Callan. I am up to its full course, we probably would have found a the chairman in residence at the Centre for Social greater proportion of parents saving into those accounts. Justice. Secondly, although we can never know for sure, there is certainly evidence from some of the providers that The Chair: Thank you very much. David Hanson, do some of the savings that are going into these accounts— you wish to start? around one in four does get extra savings—are new and additional savings that have been generated by the Q251 Mr David Hanson (Delyn) (Lab): Welcome to existence of child trust funds. If we compare child trust another of our witness sessions. We are nearing the end funds with something like the individual savings accounts, now, but I hope that you can contribute to our discussion certainly the evidence is that most ISA savings are, in in a fruitful way. I would like to start by asking about fact, just savings that would have been made anyway the objectives of the child trust fund and whether you and are put into ISAs for the tax relief. With the child think that they have been met. The first objective was to trust fund, it seems that we are, in some cases, generating encourage a general saving culture, particularly for those additional savings. on lower incomes. The second objective was to put in place an asset for all children at the age of 18. May we Q253 Mr Hanson: Dr Callan? start with Sian from Toynbee Hall? Is the child trust fund meeting those objectives? Dr Samantha Callan: I would have to differ to a Sian Williams: On putting in place assets for young certain extent. I agree with Tony that these things have people, absolutely. It is a given programme—you cannot had quite a short lifespan, so we cannot say that things opt out of it. So, even though there has been some would not have improved, but child trust funds research to show that take-up rates by parents, in terms disproportionately favour the middle classes or, in other of active involvement, are not as high as we might have words, people who are usually more financially literate—not hoped for—although the figures are quite high compared always, obviously. to other savings programmes—because it is a given Parents opened 75% of vouchers issued and, of those, programme, you are automatically enrolled. So, from 99% have not received the maximum funding available. the very beginning we know that every child benefits in Therefore, it is not those on the lowest income that are some way. In terms of contributions from parents and actually taking the initiative to open the accounts. Yes, family members, obviously there is a broad range. Early a quarter of accounts have received additional deposits, activity in the programme showed that 18% of low-income but that means that three quarters have failed to receive families were contributing in some way to the child trust additional deposits. I think a lot of people say, “Thank fund. While that fluctuated over the programme itself, you very much.” but I do not agree that it is necessarily we do know that having match funding and a process changing behaviour where it matters most, which is where people could see something—a physical asset—rather where people have fewer assets to look forward to when than just having some tax relief or something that they the child is 18. could not quite get their heads around, was a really I am just not convinced by this idea that, by 18, important step in changing people’s understanding of children will have had two or three years of financial saving. It moved people away from thinking that savings education. Where we are talking about the poorest 103 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 104 Pregnancy Grant Bill 20%, which is the concern of the Centre for Social fall back on, or financial support, particularly now that Justice, I am not convinced, because to engage in financial we are losing education allowances. It is very important education you need to engage in school, and one thing to tackle that. that we were very concerned about, in all our work, is Tony Dolphin: Perhaps I could just add that, for those the rate of educational failure among the poorest. I would groups, it is not really about lifting them out of poverty challenge the view that this is a very effective policy. so much as giving them an asset with which they can do something when they reach 18. It may be some extra Q254 Mr Hanson: Is it less effective than, for example, education or training, or something as simple as being the proposed Government alternative, which is a tax-free able to afford driving lessons, which will give them a ISA that will not necessarily encourage poorer people better chance in the job market. Even the double amount to contribute? of the child trust fund—£500 at birth, £500 at age Dr Samantha Callan: I would prefer to concentrate seven—is not enough to lift them out of poverty, but it on the fact that, at the end of the day, it is a transfer of may be enough to give them an extra chance. Not every money, which is not necessarily the best way to tackle child will be inclined to take that extra chance, but some poverty. The approach of tackling poverty by transferring may, and that is the beauty of the policy. money seemed to be the characteristic of the previous Dr Samantha Callan: The fact that we could be Government. Frankly, we need to tackle the root causes looking at very small percentages of disadvantaged of poverty and make sure that the people know how to groups who will take up the opportunity seems to make use money that is redistributed—I do not to want say it inappropriate in the current climate to make a universal “wisely,” because that is terribly patronising. We are benefit, but I am not even convinced that trying to talking about young people at age 18 living on rough target straightforward cash transfers at the very poorest estates where there is addiction, educational failure and population is the best way to help them. serious personal debt. I would be much more inclined to go with programmes that are really well targeted financial Q256 Mr Hanson: So would you advocate ending the initiatives, often for kids who are completely disaffected child trust fund for looked-after children and children by mainstream education. with disabilities as well? Q255 Mr Hanson: The two are not necessarily mutually Dr Samantha Callan: When you start to say, “No exclusive, but we can range across that another day, way, we cannot just get rid of the whole thing completely. Mr Howarth. We will have this, that and the next category,” I would want to see evidence. I suppose we do not yet have I am particularly interested in your assessments—just evidence because the children have not reached the age short, pithy comments on this, if possible, so that colleagues of majority. There will always be exceptions: some can come in—of the impact of ending the child trust children with disabilities have quite wealthy parents. fund, particularly on what I would call more vulnerable Children with disabilities tend to be concentrated in the groups such as looked-after children, children and young poorest 20%, but I am not convinced that we should people with disabilities, and those in the poorest one necessarily ring-fence those groups. third of incomes. Every manifesto, with the exception of that of the Liberal Democrats, proposed at least to maintain the child trust fund in its current form for all Q257 John Hemming (Birmingham, Yardley) (LD): those groups. There are two key questions to do with the child trust Sian Williams: At this stage, given the economic fund. The first was raised by the Institute for Fiscal climate, I would not advocate keeping the child trust Studies. Is there any evidence that doing it this way has fund for the entire population. However, for the really encouraged saving such that there is a real benefit to disadvantaged—I would include among them the groups having the money locked in for 18 years? It is obviously that you described and families with extremely low a positive thing for grandparents to be able to lock the incomes such as those with parents in long-term money away until the child is older. Is there any evidence unemployment and very little hope of employment—I that it has encouraged additional saving? have a real concern that we are pushing towards policies Tony Dolphin: No; in the sense that no one has gone that will increase inequalities. out and interrogated every parent who has put money We work a lot with young people aged 14 to 25 across into these accounts, and asked them whether they have London. We help them look at their financial future in made extra savings. I see that you have had evidence terms of training, education and employment opportunities, from the Children’s Mutual Society—I suspect that it and we know that, for many of them, not having any has already told you this—and its evidence from its assets to fall back on reduces their options. Young customer base is that some of the money that is going people are concerned that if they would like to be able into the accounts is additional savings. You can never to study or go into some kind of training, they will not have a perfect counterfactual in this case, however. have any money to support themselves, or their family will need them to get a low-paid job—that is all they Q258 John Hemming: That is one aspect. The second can get with their qualifications—or they will need to aspect is that, in a sense, money is often tighter for the be bringing in some kind of jobseeker’s allowance. We low-paid than it is for people on benefits. The IFS and see not having any assets to fall back on as a real Louise Silverton of the Royal College of Midwives have problem. argued that given that maternal health is very dependent It is not that I am particularly advocating that we on having cash now, they would advise people who keep the child trust fund, but I want to see some kind of really had tight finances not to save money until their policy that supports those particular groups. Options child is 18 but to spend it now on improving their health are the child trust fund, another form of asset base to and lifestyle. What is your view on that? 105 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 106 Pregnancy Grant Bill Dr Samantha Callan: When we talk about groups wage—have perfectly enough money to feed themselves such as children in care and disabled children, families adequately, and therefore they have spare money to are really struggling now. Relationships between the save. parents are very much under pressure. Respite care is Sian Williams: I am not saying that benefits necessarily one of the things that could easily be severely cut provide a living wage. For some families they will; for despite the aiming high for disabled children policy, others they will not. Each family is in an individual which was extremely well bought into by lots of situation—I apologise for my croaky voice—and it is stakeholders. We would recommend things such as mental about providing families not only with the skills and the health champions for children in care, but there is only a knowledge but the tools to make those choices. We certain amount of money to go around and we need to work with lots of low-income families who are incredibly make sure that what we are spending money on has the careful and incredibly capable with their money, and biggest leverage for these children’s life chances. some of them are able to save—not necessarily for the long term, but they make very good short-term saving Q259 John Hemming: I am talking about the families options. However, we also need to make sure that themselves saving the money, not about the state spending people have access to other services, such as affordable money. The question is, if families have spare money, credit, so that they can smooth consumption and continue should they spend it now or lock it away for 18 years? to save on the side. For example, giving people access to Tony Dolphin: Just as there is no evidence that the credit union facilities would be excellent. I am not child trust fund has generated extra savings, because no saying that we should lose the child trust fund, but if we one has asked the question, there is absolutely no do, I would like to see some real thought given to evidence that encouraging people to save and making alternatives and making them available. vehicles available to do so is causing any family in this Tony Dolphin: One other point is that we have to country to sacrifice putting food on the table. remember that the child trust fund is designed to run for 18 years. We should not assume that families will be Q260 John Hemming: I am asking whether you would able to save into the child trust fund every year, but we advise a family in that situation to lock the money away would hope that every family would, at some point for 18 years. during those 18 years, be in a position to save, because Tony Dolphin: It is not for me to advise them, because they were in work, had a windfall or had a reason to I am not a financial adviser. It is for them to make their save some money. They are not forced to save, and they own decision. For most families, it is not as simple as are certainly not forced to save every year. As their asking, “Shall we have food or shall we have savings?” circumstances change, perhaps the fact that it is there For a small proportion of families who are in very dire will encourage them to put away some money in a good straits that will be true, but they are not sitting down year. and thinking, “Oh, there is a child trust fund so I will put some money into it.” We know that they are not. I just do not think that that is happening. Q262 Kate Green (Stretford and Urmston) (Lab): Sian Williams: It is not an either/or situation. Trying Dr Callan, I absolutely agree with you about the importance to tackle poverty by creating an asset base is not necessarily of financial education and the range of policies that we the only solution, and it is not the whole solution. When are deploying to support people in low-income households we are looking at family health, that means giving a in particular. It was suggested to us in an earlier evidence family access to adequate income; ensuring that people session that one way of engaging young people with have a living wage; and ensuring that we are not asking financial education was to do it when they had a lump people to borrow in order to survive on adequate nutrition, of money that was theirs. That would enable them to to provide clothing for their children, to get their children think about their savings and spending habits in a way into school, to make sure that they have books and so that had some reality for them. To what extent do all the on. We are talking about making sure that people have a witnesses think that giving a young person aged 18 a living wage. Alongside that, there is the idea of creating lump of money will support their engagement in financial opportunities for young people in the future by building education, particularly in their teen years? up an asset base. Sian Williams: We work with young people in further When we assess a family situation and say that they education, and we work a lot with young people who need to decide between feeding their children properly, are opening their very first bank account and getting creating a safe environment for them to live in that is their educational allowance, and who have some real damp-free, mould-free and free from fear of gas poisoning, money to work with. If you put the child trust fund to and creating a savings base, we are looking at a serious one side and look at a young person who has their problem. It is about much more than whether we need hands on some money that has come their way, you will a child trust fund. I really agree with your comments, see that they are so focused on asking: “How do I make Dr Callan, that there we are looking at adequate income that money go as far as possible? What can it do for levels and poverty. I do not think that most families are me?” making a choice between feeding their children and Interestingly, our programme, which we run across creating a savings base. The child trust fund is not London, started out just teaching financial education in taking money from feeding children; it is creating an the classic sense of saving, borrowing and so on. We are opportunity for parents and other family members to redesigning the programme, though, because so many lock some assets away. people come back to us and say, “Brilliant, you taught me how to make this money go as far as possible, but Q261 John Hemming: So you are saying that now I want you to teach me how I can use this money to people who are on benefits—as I have said, they often leverage, to create more income opportunities. I want to have a bit more disposable income than those on a low do better, and having this money gives me an opportunity 107 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 108 Pregnancy Grant Bill to do that.” I absolutely agree with you that the moment looked-after child at how we are going to help that child when you really engage people is when they come to you acquire the skills and knowledge that it would have and say, “I have this financial concern”, or this asset, got from loving, nurturing parents. Just giving them debt or problem. money will not necessarily provide training for the rest Personally, I also believe that we should have financial of their life. education in schools as part of the national curriculum. The Consumer Financial Education Body, which aims Q265 Harriett Baldwin (West Worcestershire) (Con): to educate every adult, is one way of doing it, but a The background to the Bill is the country’s huge financial much better, cheaper and more effective alternative is to deficit, and not having the child trust fund saves the educate every child about the issues. That would not Government £500 million a year. Obviously, there are rule out the need to work with young people, because I difficult choices to be made with these types of schemes. think you learn at different stages and in different ways. Everyone here would agree that this is a nice-to-have Our experience with young people with the educational scheme. It is obviously appealing, and we have heard a allowance shows us that it would be extremely effective lot of evidence about its appeal. I am going to read out if you worked on money with young people as they take a list of seven Government policies that help to try to it out of the child trust fund, because then it is real and ensure that children have a good start in life. I want to means something. ask the witnesses whether they would put the child trust Dr Samantha Callan: I am concerned that the lump fund ahead of these other choices: protecting the NHS sum they are getting is basically a handout. If we are budget; increasing the number of health visitors; free trying to tackle dependency culture through welfare prescriptions for pregnant women; the Healthy Start reform, I would prefer it if we helped parents to help programme, which gives vouchers for milk and fruit to their children by saying, “You’ve got a job,” rather than certain categories of people; the £500 Sure Start maternity just giving them a handout. For so many children, their grant for the first child; extending nursery education for babysitting money or whatever is just discretionary disadvantaged two-year-olds to 15 hours; and the pupil income. If parents are giving pocket money, they could premium. Would the witnesses want to make the case reduce it as their children earn a bit of money. Teaching that the child trust fund is more valuable than any of those kinds of things creates a real sense of achievement those? for having earned their own income. It is being much more realistic about what the rest of life is going to The Chair: Before the witnesses answer that question, look like. it is slightly outside the scope of the Bill to be making comparisons. I understand the point that you are making, Q263 Kate Green: Aren’t you concerned, Dr Callan, but it is beyond our scope to debate the merits of a to address the inequality in asset holding, which feeds series of other policies. While I am happy to allow the through to inequality in opportunity for young people witnesses to answer the question, we do not want to at age 18? With all its imperfections, delivering a lump start a debate on the relative merits of a whole series of sum to young people at age 18—and a larger lump sum, other policies. I am sure they will find an adroit way of in terms of the Government’s contribution for the poorest answering the question that satisfies you and me. young people—partly addresses that. If you leave it to the will and wish of parents and financial education alone, you will continue to see a significantly uneven Harriett Baldwin: I would just like to highlight the playing field when young people reach age 18. fact that those policies were mentioned by the Minister on Second Reading. Dr Samantha Callan: Yes, I am concerned, but so much policy has been about, “We can’t really trust the parents; we can’t trust that children will acquire skills, The Chair: Sure, but that does not necessarily bring it so we have to do it for them; we’ll just put something in within the scope of the Bill. There is a lot more licence place and assume that they will not do it themselves.” on Second Reading than in Committee. I am not overruling Or, as I said, it is assumed that the family will not train the question; I am merely saying that we need to be a bit them in these skills. We need children to learn good careful in how we develop the theme. financial skills. We often need to help parents from Sian Williams: I think that these points are relevant every part of the income spectrum, who can often to the health in pregnancy grant. They are irrelevant to struggle with good financial management. You cannot the child trust fund or the saving gateway, because they make people do it. As for debt counselling, we have the are about completely different concepts. All the things My Home Finance scheme set up by the Department that you listed are around creating a safe and healthy for Work and Pensions with the National Housing space for children, from pre-natal all the way through Federation and the Royal Bank of Scotland. We have to being at school. The child trust fund is about gone for the child again and again in social policy, and creating an asset base for young people, as they really we have got to bring parents in, because we are talking start an independent life, and I do not think that they about a lifetime of good financial planning. are connected at all. I am not an expert who can comment on the health in pregnancy grant, so that is Q264 Kate Green: How would that work for looked-after my response. children? Whom would you be educating to provide for Dr Samantha Callan: I would say that, thankfully, the child in that case? If the state does not deliver a people are much more concerned now with early lump sum to the looked-after child, who will? intervention. I completely agree on one level that we are Dr Samantha Callan: Again, it is tempting to think talking about apples and pears, but that kind of addresses that what is necessary is hard cash, but I would much the point I was trying to make, which is about what rather we were looking throughout the lifetime of the happens if we do not get children off to a good start in 109 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 110 Pregnancy Grant Bill [The Chair] For me, the nub of this matter is lower-income families, children at risk and those who do not have strong life, and if parents have not got the skills to raise their family support mechanisms. I am not going to argue in children. We are all beginning to be very familiar with this economic climate that we need to protect the child the research about the first 18 months and first three trust fund in its entirety, but I am concerned that in five years, and the way disadvantage sets in so early, so we or 10 years’ time, we will have done nothing to tackle must think about having an asset at 18 when you have the inequalities that already exist and are worsening. so many other disadvantages. We know that they will get worse. If you look back at We could be in danger of just fixating on giving every recession, we see that inequalities widen. If you children a lump sum when they have got so many things look at the reports from King’s college, London, you that are going to stop them spending it in a very will see that that matters to everybody, not just the constructive way, so I welcome the pecking order question. poorest people but also the most well-off in society. On health visitors, practically every report that I have This is part of a long-term solution. ever written has said that we need more of them. As for nursery education for disadvantaged two-year-olds, again, Tony Dolphin: Again, I would agree with everything if all we are doing is taking away the care of children, that was said, but I would add that when looking at instead of helping their parents to care for them, that savings policy—this applies to pensions, the child trust could be a failed policy for the all the reasons I have said. fund and any savings—evidence suggests that stability Tony Dolphin: I am very reluctant to answer, too. It is is to be welcomed. One of the many things that put a false choice. I am not an expert in many of these people off saving is the continual chopping and changing areas; I am an economist, and my experience is in of the rules. We are drifting slightly off the point, but savings and asset building, not in the best way to help any survey of why people do not save enough for their pregnant mothers or children under two who are pensions will tell you that there is no trust that the rules disadvantaged. There are obviously lots of other things— will not change between now and when someone retires, £500 million-worth—that could be cut. When the Chief and that the savings might not be worthless. Changing Secretary to the Treasury announced this policy, said things like the child trust fund, and chopping and that his reason for getting rid of child trust funds was changing the rules, affects the behaviour of people who because it was wrong to borrow to give an asset to a are saving for their children, and it will also affect the child. He was not actually comparing this with any behaviour of people saving for their pensions. other item of spending at all. He was taking the opposite Dr Samantha Callan: I was very involved in writing view and saying, “This is money we are borrowing to the book that you mentioned entitled “Early intervention: give to children.” I disagree with that as well, because he Good Parents, Great Kids, Better Citizens”. The clue is is hypothecating borrowing to a certain line of spending, in the title. Graham Allen looked at early intervention and that is something that we have never done in this in Nottingham, and there was a kind of circle of country either. I just think it is wrong. There is £500 million-worth of other stuff to cut; I am sure that I interventions at different points over someone’s life could find you £500 million-worth of things, outside of course. You do not just do stuff in the first one and a your list of seven, that I would happily trade for child half to three years, because there are all the children trust funds. who have already come through that phase. All the interventions that Graham is working on in Nottingham Q266 Sheila Gilmore (Edinburgh East) (Lab): One of are about helping young people to prepare for parenthood, the issues that successive Governments have been criticised if they are at a later stage in their life course. for is not taking a long-term view of how you resolve This will never be the case, but if there were money these problems. Those people who have advocated early coming out of our ears, the child trust fund is yet intervention also said how important it is that we have another thing that could be in place to give some money consistent long-term policies, not short-term policies. I to people who would not have that asset. However, I am thinking, in particular, of the recent cross-party keep coming back to the point about whether that is work by Graham Allen and Iain Duncan Smith on sending the message that we want to send. People are early intervention and the importance of taking a long-term getting a lump-sum, gratis payment, but we actually view. To what extent is the child trust fund able to want children to learn about working for a living and contribute to that long-term perspective? about financially responsible behaviour. Sian Williams: I think that’s exactly at the heart of the matter. It is recognising that, over the lifetime of a child trust fund account for an individual family, they Q267 Fiona Bruce (Congleton) (Con): Dr Callan, the can make contributions as and when they can, and that statistics show that one in four young people have builds up opportunity in the form of a cash account for families who are not engaging with the process. I would a child to make some serious choices about their future be very interested to know whether you have evidence when they reach 16 to 18. It is about empowerment and for something you said. It has been my suspicion that recognising that while we can try to tackle long-term those on the lowest incomes and those who most need unemployment, and long-term issues around inequalities to engage in financial education are the ones who are in income, health and education opportunity, we could not doing so. What evidence do you have for that? create an opportunity for a child to have a wider range Dr Samantha Callan: As I said, in the savings accounts of choices, and the family could contribute to that; it actually opened by parents, 99% have not received the does not all have to come from the state, but the state maximum funding available, so they were therefore not can support that choice. That is a long-term strategy. those on the lowest incomes. It became a fairly passive Are we now saying that we cannot afford to invest in the system of, “The Government will do it for you.” That is future? my main plank of evidence. 111 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 112 Pregnancy Grant Bill Q268 Fiona Bruce: Thank you. You also indicated borrowing and managing a bank account so you do not that one of the best investments in a young person’s life, go overdrawn and pay fees and penalty charges. The and perhaps one of the best ways of tackling future child trust fund cannot help with that. inequalities, is to give sound financial advice. Do you Will it help engagement with a financial institution? feel that we do that adequately? Again, I am sure that opening a bank account and Dr Samantha Callan: It is patchy, and when you take paying in your first pay cheque or benefit cheque will do away strictures on schools as to what they should do, it that as adequately as a child trust fund. The honest could obviously become even patchier. There is some answer is that we will not know until it has happened. amazing voluntary sector provision, and there are people Dr Samantha Callan: It is very top-down as well. It is such as Shirley Conran. The market is beginning to be a Government-led thing, but why should we not be populated by people saying, “The schools aren’t doing encouraging financial institutions to do superb marketing it well enough.” But even if the schools were doing it to young people? That would take it away from its all stunningly well, what about the kids who have opted being down to the state. out of school? Are we really ensuring that they still get Sian Williams: I think the primary purpose of the that imparted wisdom? That is why pupil referral units child trust fund should not be seen as engagement and should be doing financial education and giving hard education in that process, because it is far too passive to skills to excluded children who go through entry-to- have that impact. I have seen some fantastic programmes, employment. We need to ensure that at any point when our own and other people’s, which encourage interactive young people are receiving education out of the mainstream. engagement around financial services and issues and That is an important place to put in those skills. money management. For young people in Britain in 2010 and 2011, you would be better off with a computer Q269 Fiona Bruce: One more question, if I may, game or a game at school, or a My Money week or Mr Howarth? The child trust funds cost us £500 million MyBnk going into schools—those things that the voluntary a year. Some witnesses have given the view that, despite and financial education sectors do extremely well. Engaging its being a universal benefit, much of the money, potentially with financial services is much more about balancing millions of pounds, goes to young people who already your books daily and thinking about the future. have a nest egg, but that is a price worth paying, so The truth is, it is not simply young people who struggle children from low-income families receive what you to engage with financial services. I hope that we will called a “handout” at 18, although they may have had move on to talk about the saving gateway as well. From no engagement with the process on the way. Do you the saving gateway pilots, we know that many letters think that that is a price worth paying, or should we be landing on the doorsteps of saving gateway clients look looking to invest the money differently, or at least invest as though they come from the taxman, and no one what money we have, bearing in mind our financial willingly opens a letter from the taxman. We did a lot of constraints? work around the saving gateway and the child trust Dr Samantha Callan: I think we are seeing a major fund to try to explain to providers that if they want to reconfiguring of the welfare state, in which we are engage people in financial services and financial issues, getting away from the idea that we have to have universal they need to do it in a way that means something, and is benefits so that people do not feel stigmatised—we have not off-putting. With the child trust fund, I do not think paid our taxes, therefore we can take a slice out of the that in itself, it is an effective way of tackling the lack of welfare state. That thinking is more and more outdated. engagement with financial planning and financial services Therefore, I do not think that it is worth while. We have with young people and adults in this country. It is an to be far more targeted and sensible with public finance. essential element of building up an asset base for disadvantaged children. Fiona Bruce: Thank you. Q271 Yvonne Fovargue: Can we return to the asset Q270 Yvonne Fovargue (Makerfield) (Lab): I have base? What evidence is there, if any—including that two questions. I understand that the child trust fund from other countries—of the difference that holding an provides an asset, but, equally, it is supposed to get asset makes to behaviour at age 18? Does having an engagement with financial institutions. We have heard asset make a difference? Do people behave differently that a lot of parents do not engage with financial when they have one? institutions—there is a fear of them. Do you feel that by Sian Williams: In terms of making choices? making the child engage with financial institutions at the age of 18, the child trust fund will put them in a better position than their parents are because they will Yvonne Fovargue: Yes. lose their fear of financial institutions? Sian Williams: Absolutely. I cannot quote studies off Tony Dolphin: It is an aspiration of child trust funds. the top of my head, but we work with young people. For Ask me again in 12 years’ time and I might be able to example, with education maintenance allowance, which give you an answer on whether they have achieved that we are looking at being cut, we have conversations on a aspiration. I have always been more sceptical of the daily basis with young people, who are asking: how am financial education and engagement arguments for child I going to manage my studies? How am I going to make trust funds, albeit, as you will have gathered, I am a sure that at the end of my EMA I can move to earning strong supporter of them for other reasons. On financial my own income now that I am engaging with money in education, yes, the child having a fund that you can a proactive way? I agree that we do not want to send out point to as an example will help with savings and a message that people can rely on handouts, which is a interest rates, but financial education is about a lot disempowering process. But that is very different from more than savings and interest rates. It is about debt, saying that we are trying to address inequalities. That is 113 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 114 Pregnancy Grant Bill [Yvonne Fovargue] We have very little time left to cover the rest of the Bill, so I request those asking questions on the next why I keep returning to the fact that I am not arguing section—and, indeed, asking the last question on this the case for a universal child trust fund; I am arguing section—to make them well-targeted and short. It is not the case for addressing inequalities. that you have been prolix in your responses, but could In the States, for example, there is much higher the witnesses please bear that in mind? investment, on a personal level, in philanthropy and donations. Some fantastic programmes are run there Q272 Paul Maynard (Blackpool North and Cleveleys) around individuals making the match funding that we (Con): My question is very much to the point. What make here in the child trust fund for young people. role has the child trust fund played in the financial Because that is done on an individual basis, you see education of children at primary school level? some really interesting stories coming through. Sian Williams: To my knowledge, very little, if any. We see that much more there than we do here, because it is a blanket state process here, but in the States it is Tony Dolphin: Yes, but remember that the oldest child done on an individual basis. Yousee some really interesting with a child trust fund has only just turned eight. stories about the choices that people thought they could not make, and then when they have that asset, those Q273 Paul Maynard: That is why I said primary choices suddenly become open to them and lives change. school level. Without sounding too visionary: lives change when Dr Samantha Callan: I do not know the answer. people have assets. That is the whole ethos that our society is built on—when you have some assets you can make decisions and choices. The Chair: I didn’t realise that my words would have Tony Dolphin: The child trust fund is unique such a profound effect. internationally, so there is no evidence of what that sort of scheme will do to children at age 18 and whether Q274 Sheila Gilmore: I want to ask about the saving having assets changes their lifestyles and life chances. gateway, with which I understand that Sian, in particular, A lot of schemes are run in the US, where the has been involved. Would you start by saying what that campaign for asset-based policies has been much more involvement was and what your view is of the saving grass-roots and has developed over many years with gateway proposal? lots of pilot and trial schemes. A popular one is an Sian Williams: We were involved in looking at why it individual development account, which encourages people might be a good programme, in testing ideas around it to save by providing matching assets. There is a lot of through a pilot and, finally, in being contracted to be a evidence from those studies—I cannot quote off the top regional trainer to roll out and publicise it. Sorry, I have of my head, chapter and verse—that shows that people forgotten the second part of the question. who have built up an asset through savings in such accounts are more likely in later life to own a business, to own their own home, and to have gone through some Q275 Sheila Gilmore: What is your view of the saving training or other education that gives them higher potential gateway as a means of assisting low-income families to earnings. There is a lot of evidence from the US that save for the future? this works, but that evidence is in the case of younger Sian Williams: The potential is that the saving gateway, adults rather than children and, as I said, no one else as a concept around tempting people away from believing has tried child trust funds before. that there is no way to save or to find money to do Dr Samantha Callan: If you are already on even the things, actually has a real impact and a real benefit. It bottom rung of the ladder, having an asset can help you means that making a small sacrifice by finding something claim, albeit soft and slowly. However, we are particularly from my budget to save brings me something greater concerned about people who are not on the ladder at back. There is potential in that, but there are also some all, and who have low capacities. We talked a lot before serious potential flaws in the programme. We severely the election about broken lives. I am concerned that for underestimate resistance in every part of the population people with broken lives—who have addicted parents, to changing our financial behaviour. The education have addictions themselves, or have educational failure— programme that was going to be linked to the saving maximising the benefit of an asset must feel like climbing gateway savings mechanism was extremely important. Everest. As I say, if you are on that bottom rung, being I hoped that, through the saving gateway, we would be from a poor background, but without those other engaging families in discussions of their choices about disadvantages, perhaps you can maximise the benefit of money for today and for the future. it, but is it necessarily helping those who are most I saw the saving gateway as having two outcomes. vulnerable? I am not convinced. Although I have just said that, in my opinion, the child trust fund played no role in educating young children The Chair: Thank you. I will bring in Paul Maynard about money, I believe that the saving gateway would to ask the last question on this section and then I will have played a role in creating a specific opportunity for move on to the saving gateway. I think Kerry McCarthy conversations with low-income families around choices will be asking the first question about that. on what they spend today and what they save today. The other outcome that I was looking for was that, through Kerry McCarthy (Bristol East) (Lab): I am doing the this scheme, low-income families would be significantly health in pregnancy grant. encouraged to save. For me, the crucial factor is not only building up a savings base, but providing an alternative The Chair: Sorry, it was Sheila Gilmore. to high-cost credit. 115 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 116 Pregnancy Grant Bill We run the illegal money lending team for London. Sian Williams: Our experience is that for many people— I see the damage from people having to access high-cost irrespective of income—you have got to see a significant credit to live so as to compensate for some blip, which benefit to change your behaviour. Just knowing something might be the loss of a job, the loss of casual earnings, a factually is not enough. Behavioural economics comes problem caused by the overpayment of benefits being into this with real power. All our experience is that that clawed back, illness in the family, the cooker blowing up matching element really helps drag people out of thinking or anything. With even a small pot of money, a family “I can’t save. I’m not a saver. I’m not the kind of person could choose to go to that first, or could use that to take that any financial institution would have as a client,” to to a credit union to access low-cost, or lower-cost, “You know what, that money really makes it worth credit rather than being forced to use high-cost credit. altering the way I think.” It will not work for everybody, That, for me, had a significant potential to change the but it will work for a significant number of people. long-term flow of money within a family. That was Given that we do not advocate that any one policy will really important to me. There is an asset base, there is tackle poverty or financial exclusion, it is a useful education, but there is also giving people choices around element of a toolkit. If you start to move below that where they get their money to pay for things today. level of the matched funding—the 50p in the £1—you They would have this little asset built up that they could will see a tailing off of its impacts. You will still reach use, because they could take money out of the saving some people with a level of 25p in the £1, but you will gateway pot and put it back in. That was the great thing not affect as many people. That is a given on anything about it—the money was not locked in, the system was like this. flexible. Dr Samantha Callan: Because the matched funding is so high, other savings products were uncompetitive in Q276 Sheila Gilmore: One of the criticisms that was comparison. There was not much continuity to move on made on Second Reading was that, in the pilots at least, to other products. Some 98% of those opening a saving there was limited involvement from providers, which gateway account already had an existing form of account. limited access and the outlets or inlets for people to go There were three things that they were looking for in the to. One of the proposals was that the link could have pilot. Did it get people to start saving? Did it get people been made with post offices. I was interested in your to start formalising their savings, instead of it just being comments on ease of access being critical. under the mattress? Did it increase financial education? Sian Williams: The saving gateway as it stands is not When you look at the saving gateway 2 pilot, it is clear perfect. I would change many things about it. I am in that there were disappointing results on those three favour of the fundamental concept of working with areas. It rewarded people who already had savings at an people to build up a savings pot to change people’s uncompetitive level. behaviour. One of the things that we see on financial exclusion—this applies not only to the saving gateway Q278 Sheila Gilmore: I might be completely wrong, but to so many aspects of accessing, using and managing but my understanding was that the range of people who money in this country—is that, despite the common were allowed to take part in the saving gateway 2 pilot goal, too many people are excluded from good financial was quite wide. It included not only people who were services. If you are going to make a scheme such as the eligible through being in receipt of certain benefits, but saving gateway relevant and accessible, you have to have people who received quite high incomes. It included as many access points as possible. I absolutely agree individuals who earned up to £25,000 and families who with that. earned up to £50,000. I can see how the potential shift Tony Dolphin: Perhaps I could add a postscript to that you described might happen, with people saying, “I that. We have been doing some work recently with won’t put the money in the Post Office or the bank. I’ll people in low earner families—not those on the lowest put it in the saving gateway because that is giving me a incomes. These are people who have the potential to better rate of interest.” However, my understanding was save and we have been working to find out what would that the saving gateway rollout would apply only to make them save. One of the things that we were interested people on benefits, who do not have those sorts of in was where they would like to have their savings. There choices. is a very clear generation gap around the age of 40. If Sian Williams: That is right. you ask anyone over the age of 40 that question, they will say the Post Office. If you ask anyone under 40 that Q279 Kerry McCarthy: How successful does each of question, they will say the supermarket. If you could you think the health in pregnancy grant initiative has get those two providing a financial product, you have been? cracked it. Dr Samantha Callan: I know the Barker hypothesis very well: that reduced foetal growth is strongly associated Sheila Gilmore: Some supermarkets have post offices. with a number of chronic conditions later in life. However, by 25 weeks, so much has already happened. Your The Chair: Does anyone have anything further to iodine levels and folic acid levels need to be up way add? before then, with the iron obviously continuing throughout the pregnancy. Q277 Kate Green: I just wondered whether you could There was absolutely no guarantee that the grant specifically comment on how important having a matching would be spent on nutritious food. I had a look at that mechanism in the saving gateway was, and whether it great oracle, the Mumsnet website, where the chat resounded was necessary for the matching level to be pitched at the with people talking about the health in pregnancy grant. level that it was? If it had been lowered, would it still People said that they were using the money to go to a have attracted some positive behaviour? health spa or to buy an Amazon Kindle. One person 117 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 118 Pregnancy Grant Bill [Kerry McCarthy] supporting mothers at a time when costs might rise? Do you feel that it is the right timing to try to help with said, “I feel terribly guilty. I was planning to spend my some of that extra expenditure or would something pregnancy grant on a trip to a spa so that I could have a earlier or later have been preferable? baby bump massage, a manicure and a pedicure and just relax for a bit, but everyone else is saving their The Chair: Before the witnesses answer, to enable us money for the baby.” In other words, she felt guilty to get through all of the business in the required time it because she was spending the money on something that might be as well to take two questions together and then was somewhat to do with health in pregnancy, but many to ask the witnesses to reply accordingly. other people were holding on to it for when the baby came along. I am just trying to give a flavour of how incredibly badly targeted it was. One woman said, “I Q283 Sarah Newton (Truro and Falmouth) (Con): bought some really nice shoes—and I’m not talking Are the witnesses aware of the Healthy Start programme, booties—to treat myself.” Some said, “I pay my taxes so which is well supported by health care professionals I should jolly well get it,” whereas others said, “I didn’t and is very much targeted at maternal health? If so claim mine because I just couldn’t justify it to myself. would they like to comment on its effectiveness? For one, it takes so much paperwork.” Sian Williams: I feel very passionately that we should speak only on issues that we are expert in. This is not Q280 Kerry McCarthy: Is Sian’s experience of people my area of expertise. getting the health in pregnancy grant in Tower Hamlets Dr Samantha Callan: I completely agree about digital that they spend it on spa treatments? exclusion and so Freecycle and things like that that Sian Williams: I start by saying that I am in no way would give parents access to low-cost or free second-hand an expert on the health in pregnancy grant. I cannot baby care products would not necessarily help the poorest. comment from a detailed knowledge of the grant. I But how about if you could take along your old pram to would say that the majority of low-income earners in children’s centres? I would love to donate my old pram Tower Hamlets will not be on Mumsnet. They will be somewhere because none of my middle class friends digitally excluded and many of them will not even want it, frankly, because they want to buy their own speak English. Although I am not going to set out any brand new pram. Rather than it being about the clear and reasoned arguments for the health in pregnancy Government giving people money so that they can be grant, because it is not my area of expertise, I simply say philanthropic—although I do not think it is particularly that many families will be using any additional money philanthropic to do an NCT second-hand stall, but we that is paid to them to support the health of their family tend to constantly think that the Government must in some way. I will leave it there, if I may. provide—why not have a big society perspective that Tony Dolphin: I am no expert either, but the case for it says, “Well, how about communities contributing far being means-tested rather than universal has already more to enable people to afford stuff for their babies?”? been eloquently made. Q284 Kate Green: The other point I wanted to develop Q281 Kerry McCarthy: The suggestion has been made was on the healthy diet. As I say, I feel that the grant is by Samantha that the payment at 25 or 26 weeks is too not particularly helpfully named, but what we also late in the day. Presumably you think that if it is still heard this morning was that by delivering an extra lump paid, it should be paid earlier? of money to families, it supported particularly low Dr Samantha Callan: I do not think it should be paid, income families to spend their income in other ways, frankly. If there is a problem with nutrition in pregnancy, including on the essentials of diet, heating the home it will not be just about money. Often it is about not and that kind of thing. Given that I think Sian has said knowing how to cook nutritiously. I am not saying that that perhaps some of these benefits could have been all poor people are rubbish housekeepers, but quite the more targeted, do you see a place for extra financial opposite—some of them would put us all to shame. support in the late stages of pregnancy that enables Some of the schemes that help the most disadvantaged families to meet the outgoings that are associated with families teach them cooking and about all sitting down being a mum-to-be? together to have a meal. It might sound a bit paternalistic Sian Williams: One of the problems that we still see but, again, it is about the early intervention. It is about despite all the laws is that pregnant mothers are most at what we do to help parents give their children the best risk of losing employment. Anything that boosts a start in life. A lot of them will not have done cooking in pregnant mother’s income at a time when she has increased school. A lot of them will not have learnt from their expenditure can only be helpful. On the other hand, I mums or dads how to cook. There is so much more we also believe that it needs to be targeted on those who could do to make sure that money is spent on health need it. One of the difficulties about all of the three food. programmes that we are discussing today is that they receive bad press because they are not well targeted. Q282 Kate Green: This morning we heard from other That really matters to people in today’s climate, because witnesses that in the later stages of pregnancy women people feel every pound that is being taken away from might spend the money on other things to get ready for them. It does not matter whether it is being taken from the baby. We had evidence from the National Childbirth them through heavier taxes on a well-paid income—or a Trust, for example, that its second-hand shops were low-paid income—or being taken from their benefits. busy with mums-to-be spending that money on prams So targeting is very important. and things that they would need when the baby first When I look around Tower Hamlets and I see the arrived. It has perhaps been an unfortunately named number of young mothers on very low incomes—20,000 grant. What would be your perception of its efficacy in people are on less than £15,000 a year—that really 119 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 120 Pregnancy Grant Bill worries me. I am worried about the health of the child every child. We could change this country in a generation and about the options available to that family. Are they with well targeted financial education at the school living in good accommodation? Is it well ventilated? level. Are they living in damp? Can they turn the heating on? Lastly, I would like to look at improving access to I support anything that supports those basic needs, affordable credit. When low-income families need to which include good nutrition, but I do not realistically dip into credit, there should be a low-cost system that expect that young mother to go and spend all of that does not lead to either the threat of having their legs money on food. She is not going to do that. The grant broken or being abducted by a loan shark, which we means that she will increase the money that she spends deal with on a daily basis, or the less serious, but still on food by a percentage, but she will also be able to turn long term, implications of repaying interest over such a up the heating, or take the bus to the health centre, long period that they never get out of debt. Looking at, rather than having to walk. for example, improving credit union access and affordable credit access is key to tackling some of the inequalities I see a lot of people who miss appointments because that will be worsened by the removal of the programmes. they cannot find the bus fare, or because they cannot take the time off work. Again, I am not an expert on the health in pregnancy grant, but I know that within The Chair: Thank you very much. We will now move Tower Hamlets any money that you take away from a on to the next set of witnesses. low-income family, particularly a family that is about to have another mouth to feed, will be keenly felt. I cannot The Chair: The Minister needs no introduction to the comment on the timing of the grant. Committee on the grounds that he is a member of it, but perhaps Mr Little would like to introduce himself. Q285 The Chair: We have now exhausted the questions, Matthew Little: My name is Matthew Little, and I and no doubt we have exhausted the witnesses, too. am the Bill manager for this Bill. Before I close this session, is there anything that any of the witnesses want to say—they should by no means Q286 Mr Hanson: Good afternoon, Mr Little. May I feel obliged to say anything—that they feel they have start by asking you, Minister, what you have learnt from not had the opportunity to say in answering our questions? the evidence sessions that might help to influence you If there is, they should feel free to do so as briefly as over the next two days’ consideration of the Bill? possible. Mr Hoban: Clearly, a variety of points have been Dr Samantha Callan: I have read that—this is not just raised in the evidence sessions. For example, Carl Emmerson Mumsnet, which, you are right, is quite a middle-class from the IFS raised some issues about the effectiveness website—some people are spending their health in of the child trust fund and the savings gateway, and we pregnancy grant on a doula, which is somebody who is have just had a very interesting session on the health in just a friend while you are giving birth and during the pregnancy grant. I have read Committee Hansard, and first few weeks. In other words, they were saying that it some interesting points have been raised, but they are is not food, but support that they need. Maybe they are points that we have been through in the development of on their own, or their partner or husband is not being this policy process. very supportive, or whatever, but those women actually wanted to spend the money on getting something much richer, having a friend around. I think that it is very Q287 Mr Hanson: I want to focus on a couple of key valid to spend money on such community initiatives issues about the successor product to the child trust and other things that can really change the whole fund, because that would be key in our consideration if trajectory of life. we were taking away a particular provision. What is your assessment of the concerns of Martin Shaw in the Sian Williams: I would like to stress that my concerns evidence session, regarding the establishment of the about losing the child trust funds and losing the saving junior ISA? gateways are really about tackling inequality for very low-income and disadvantaged families. Outside of these Mr Hoban: In terms of the timing of when it opens, three particular programmes, there are three key issues or in terms of how many people are taking it up? that we need to think about. First, there should be an asset base, or at least an Mr Hanson: In relation to both the gap, and the cost opportunity to draw on a grant or low-cost loan, for of the investment. young people who are making life choices at 16 to 18, Mr Hoban: In terms of the gap, let me be really clear. and longer if possible. We have just seen the loss of the We hope to introduce the junior ISA next autumn, but EMA and we are seeing higher tuition fees, so the gap is eligibility will start from the moment the child trust going to grow. Although we are not a socialist country, fund terminates. So, there will be a savings vehicle we are a country that believes in equal opportunities, available for children as soon the CTF is turned off. and those opportunities are becoming ever more unequal. That is something that we are very keen to ensure, and it So I feel passionately that, although we may lose the was one of the factors that drove me when thinking child trust funds, we should at least give some consideration about the policy design. It was certainly a concern that to how we address that gap. was raised with me when I met stakeholders earlier this Secondly, we should recognise that low-income families, year to discuss the replacement of the child trust fund. on the whole, manage their money quite well. There is still a long way to go with financial education, however, Q288 Mr Hanson: We have been told this week in and I would really like people to look at rethinking the evidence sessions that as well as the press release you national curriculum to include financial education for put out on the Second Reading debate, consultations 121 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 122 Pregnancy Grant Bill [Mr Hanson] Q295 Mr Hanson: Can I just ask one final question, Mr Howarth? What weight do you give to manifesto are going on, even this week, for the first time with commitments in policy decisions? providers, about a replacement for a scheme that will Mr Hoban: We are part of a coalition. Given the end on 3 January. Do you think that it is fair to end the outcome of the general election, it was right to discuss scheme before consideration has been given to nailing the coalition platform. I am pleased that my hon. down all the nuts and bolts of the replacement scheme Friends the Members for Bristol West and for Birmingham, for that date? Yardley debated scrapping the child trust fund on the Mr Hoban: In many areas of policy you end up with manifesto platforms. We helped them deliver that. actions being taken in parallel. We had an informal consultation with stakeholders prior to the publication Q296 Mr Hanson: For the record, Minister, could of the document last week, and we are in a good place you say what your party’s manifesto commitment on to ensure that there will be a replacement in place by the child trust fund was at the general election? autumn next year that will apply to all children from the Mr Hoban: I think the hon. Gentleman placed that date that the child trust fund is turned off. on the record on Second Reading and has also tried to reflect that in his amendments, which we discuss later Q289 Mr Hanson: What is the cost of establishing the on. We wanted to keep the child trust fund for the junior ISA? poorest third of families, but we have been unable to do Mr Hoban: The cost is relatively low because it uses so. That is a consequence of the costs of reducing the technology that is already there within HMRC. deficit.

Mr Hanson: Could you then therefore— Mr Hanson: Can you give us a figure? Mr Hoban: I think that the estimate that we have The Chair: Order. Mr Hanson, you asked to have one been provided with is less than £500,000, which is a final question not a penultimate question. significant saving for the taxpayer compared to the £500 million per year that we are saving through turning off the child trust fund, and it will go some way towards Q297 Mr Hanson: My final question then is what tackling the budget deficit. would be the cost of maintaining the child trust fund as per your manifesto commitment? Mr Hoban: I have not got an assessment of that cost Q290 Mr Hanson: Perhaps you can clarify that for with me, but looking at the challenge we face in tackling the Committee. The contributions to the child trust the huge budget deficit we have and the amount of fund have already been reduced, so the cost of abolishing money we are spending on interest on a daily basis, we the contributions and the fund from January is not concluded that the best thing to do to make progress on £500 million a year. tackling that deficit was, sadly, to scrap the child trust Mr Hoban: No, but we are looking at the entire fund. package of the measures with the child trust fund— John Hemming: Much as we argued to scrap the child Q291 Mr Hanson: Could you indicate to the Committee trust fund in the manifesto, what has not arisen in the cost of this Bill ending on 3 January 2011? evidence is a question about whether the model of the Mr Hoban: This Bill will reduce the full-year spend child trust fund without funding from the Government on the child trust fund by £50 million. is useful as an alternative to the ISA model. The child trust fund model is locked in and the ISA model is an extension of ISA. What are the costs of continuing to Q292 Mr Hanson: Exactly. So the £500 million figure allow people to open new child trust fund accounts with that has been bandied about the Committee in relation no money? to this Bill is not accurate. Is that correct? Mr Hoban: On the point about the lock in, it is our Mr Hoban: Well, no. The policy package that we intention that the junior ISA will have a lock in until the announced earlier this year as part of the coalition age of 18. It replicates that feature of the child trust plans for tackling the deficit was £500 million. fund. If you kept the child trust fund system going as it is as the moment, you would end up issuing a unique Q293 Mr Hanson: But could you confirm that the reference number for no discernable purpose to every cost of this Bill is less than £500 million, and is about child who is born. You need to maintain those records £50 million a year? over 18 years. I think you would find that you ended up keeping a system going that costs about £5 million a Mr Hoban: I have already said that. year. If I compare that with moving to a voluntary system where no one is required to contribute to the Q294 Mr Hanson: Exactly. I just want it on the costs we anticipate for our scheme, I do not think that record, because colleagues in the Committee have been that represents good value for money for taxpayers. quoting the £500 million figure, which is not correct. Mr Hoban: We must look at this in the round. What John Hemming: In essence, because the junior ISA we have done is take a two-stage process to achieving will have lock in as well, there is nothing to be gained by our goal of cutting costs by £500 million. That first people in having the child trust fund model? stage was in the regulation that we dealt with in July this Mr Hoban: No, I do not think so. We have taken the year, and this completes that process. best aspects of child trust funds. 123 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 124 Pregnancy Grant Bill Q298 Yvonne Fovargue: On the junior ISA, we have Mr Hoban: That is a matter for the Under-Secretary heard comments in the evidence session that it will of State for Business, Innovation and Skills, my hon. benefit higher rate taxpayers, but that it will not be of Friend the hon. Member for Kingston and Surbiton benefit to low-income non-taxpaying families. Would (Mr Davey). You make an absolutely key point about you like to comment on that? access points. One of the problems with the saving Mr Hoban: The important thing is that there is a gateway account was the number of access points at vehicle designed to encourage people to save. Encouraging which it would be delivered, which was one reason for people to save is not just about tax incentives; the our decision to scrap it. We found that no building money will be locked in. We want to make sure that it is societies would sign up to deliver it and that only the accessible to low-income families, so it is a very good Royal Bank of Scotland and Lloyds would offer it. The model. We can deliver some of the objectives around Post Office wanted subsidy from the taxpayer for offering encouraging saving without encouraging significant costs it, and only credit unions that did not have national to the taxpayer. coverage were prepared to go down that route. We did not feel that there were not enough access points available to enable it to reach out to as many people as it should Q299 Yvonne Fovargue: In the evidence sessions yesterday, have done. That is one reason why we chose not to some of the witnesses—particularly those from, I think, proceed with it. 4Children—were saying that the measures would increase People have come forward with ideas about how to inequality. What are your comments on that? use the Post Office more effectively.The British Association Mr Hoban: This does raise a question about how of Credit Unions has put forward proposals for using effective the child trust fund is in reducing inequality. the Post Office as a way of expanding the number and We know that there is a very poor evidence base for reach of credit unions. The decision on whether to that. It has not been established sufficiently long to pursue that is one for others to make. When we design determine what the effect is on tackling inequality. But products to meet the needs of those on low incomes, we we need to bear in mind that, out of the CTFs opened must ensure that their design encourages take-up. by low-income families, only 13% received contributions from their parents or from others, whereas for better-off The Chair: We will now move on to the saving gateway. families that figure is 30%. In itself, it is hard to say whether the CTF will actually reduce inequality. Q302 Sheila Gilmore: Both the saving gateway and child trust fund are long-term policies designed to encourage Q300 Yvonne Fovargue: You have mentioned that people on low incomes to save and facilitate them to do there has not been enough time to conduct an impact so. Rather than just saying that because many providers assessment. Have you considered delaying this until you were not prepared at the outset to come in on it, did you can have an impact assessment on all the proposed give any consideration to allowing it to get started so measures? that you could build up a network? You mentioned one or two potential changes, such as the credit unions’ Mr Hoban: It is an easy thing to put off difficult discussions with post offices. Rather than saying, “Let’s decisions. If we chose not to scrap the child trust fund, not have it”, why not allow it to start and to build up we would have to find another £500 million a year, by once people see it begin to work? cutting spending somewhere else, raising taxes or encouraging borrowing. Given the scale of the deficit Mr Hoban: Given the limitations on access, the cost and of the challenge we face, we must take difficult and the fact that it has not yet started, we decided that it decisions now to tackle them. We cannot put problems would be best not to continue with the policy initiative. off until tomorrow. If we delay resolving some of those That is why we have decided to scrap it in the Bill. There issues, the people who will pay the highest cost will be is a good question about how effective it would have the poorest. That is something that the right hon. been. There were two pilots on it, which were extensive. Member for Kirkcaldy and Cowdenbeath (Mr Brown) It is interesting to note that the previous Government commented on before becoming Prime Minister. made the pledge in their 2001 election manifesto, so clearly they had some time before the Bill was introduced and there were concerns about how effective it would The Chair: We have two more topics to cover in this be. Carl Emmerson suggested on Tuesday that it would evidence session, and two other Members—Sarah Newton not necessarily deliver high levels of savings. and Sheila Gilmore—have indicated that they want to There are serious question marks about whether it ask questions on this topic, but they will have to be very would be effective in increasing saving. We recognise the brief. need to increase saving among families on low incomes. That is one of the reasons why we support the annual Q301 Sarah Newton: My question is a good bridge to financial health check to give families more advice the next one, which is on the saving gateway. With about managing their money. That is something that regard to promoting savings, especially among people the industry will fund by CFEB, so there are other on low incomes, who traditionally do not save, we have initiatives that we have in place that will encourage heard a lot of evidence about the importance of access people to save. There are other measures coming further to the places where they save. We have found universally down the track, such as auto enrolment, a net that will that they need a local and trusted organisation that encourage people on lower incomes to get access to offers value-for-money products. Given the coalition pension savings for the first time. Government’s commitment to the post office network, which is welcome, what discussions have you had with Q303 Sheila Gilmore: Given the restrictions on the colleagues about developing low-cost financial services roll-out of saving gateway, I do not think necessarily through that network? that the pension savings is an alternative. One of the 125 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 126 Pregnancy Grant Bill [Sheila Gilmore] use of money if it was means-tested and went to families who need the money most. Was that under consideration merits of a saving gateway, particularly in relation to at any point when you looked at introducing the Bill? credit unions, was the incentive to save. The ability of You are obviously going down the road of means-testing credit unions to build up their savings and thereby child benefit to an extent. Many people see the health in improve access for people in some communities, which pregnancy grant as an advance on child benefit before do have credit unions—admittedly, not all have yet—to the child is born. Was the possibility of using that cheap forms of credit is one of the things that can make money more wisely under consideration, rather than a huge difference not just to people’s income, but their axing the whole thing entirely? not getting into debt and not having to borrow at times Mr Hoban: One thing you need to bear in mind when of crisis. Do you not agree that to enable that to happen looking at these three measures is to recognise that you is particularly important if we want people to be able cannot look at them in isolation. For example, with not to fall into a cycle of debt? health and pregnancy, there are other sources of funding Mr Hoban: That is a very important point. One thing available to those on low income who are pregnant. So that struck me when talking to credit unions is the we need to not just look at one measure in isolation, but number of people who have their benefit paid into a take into account the broader ranges of financial support. credit union account and actually leave some behind for a saving to actually provide a cushion against unexpected Q306 Kerry McCarthy: But there are no other payments changes in their income. It does play back to a point available to pregnant people that are rising to compensate that Carl Emmerson made on Tuesday that for this being axed. “There was not any really strong evidence from the saving Mr Hoban: In terms of the balance you have to strike gateway that it led to more overall saving from lower-income in policy making, yes we are scrapping this. But it is an households.”––[Official Report, Savings Account and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 18.] important contributor to tackling the deficit and there are other sources of funding available to those on low It may be in a different pot from their current account, income who are pregnant. but that does not mean to say that they have actually saved more as a consequence. Q307 Kerry McCarthy: Such as? Mr Hoban: The Sure Start maternity grant is available. Q304 Fiona Bruce: What has come across to us from There is a voucher programme for food that starts at a several witnesses is that financial education, particularly relatively early point in pregnancy and, I think, carries for young people, is patchy. I wondered whether your on until the child is four years old, so there is other work on this Bill has led you to consider how we could support. This is untargeted. It was not piloted. It was improve on that in light of the fact that the financial just introduced in the 2009 Budget. There is no link savings education element, say of the child trust fund, is between receipt and what it is used for, and that was going. It has also been pointed out that only three out very well established in the last session. One of the of four young people’s families engage with the savings advantages of the voucher programme is that it is education element of that, so we have one out of four clearly linked to nutrition. young people potentially receiving no benefit at all bar what one witness called a handout at 18, which perhaps does not inspire savings at all—but rather the opposite. Q308 Kerry McCarthy: Several people said on Second Have you considered how we can improve our service to Reading that you cannot trust women to spend it on the young people to give them the best start in life in terms right things—you can’t trust them to spend it on their of financial management? own health in pregnancy or on things for their unborn child. If that is the case, why are we not far more Mr Hoban: This is something that I feel passionately prescriptive about other benefits that are paid to people, about. I have seen a number of programmes delivered in such child benefit and winter fuel allowance? Are you schools that improve financial literacy. PFEG does a suggesting that we go down the road of vouchers for very good job. It is funded by the consumer financial everybody? education body to help its work. A lot of businesses support financial education projects in both primary Mr Hoban: It is clearly a grant that is designed to and secondary schools. We cannot afford to wait until come with no strings attached. People can choose how today’s five-year-olds are in their 60s to say that the job to spend it. There has been a lot of discussion, now and has been done on financial education. That is why we in the previous evidence session, about how people were very supportive of the consumer financial education might choose to spend it. I am just saying that there are body, when it was in the Financial Services Bill last more targeted means of support available than the year. We were very keen to see that set up. We were the health in pregnancy grant. first party that advocated the national roll-out of financial advice to tackle some of these problems, and to help Q309 Kerry McCarthy: But you are saying that that is people face them now. Education and school have an a criticism—the fact that it can be spent on things that it important role. There are plenty of people there to is not designed to be spent on? provide support, but it is a multi-generational issue that Mr Hoban: It is a criticism that a number of people we need to tackle. have made of it across the spectrum.

Q305 Kerry McCarthy: During the evidence sessions The Chair: Harriet Baldwin. that we have had, one of the main points of criticism—to the extent that there was any criticism—was the fact Harriett Baldwin: The Minister just replied to the that it is not targeted sufficiently. It would be a better point I was going to raise. 127 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 128 Pregnancy Grant Bill The Chair: Is there anything further you would like to Amendment 5, in clause 1, page 1, line 18, leave out say to the Committee, Minister? ‘2011’ and insert ‘2014’. Mr Hoban: No, I am sure that I will have plenty of Amendment 14, in clause 1, page 1, line 18, leave out opportunity over the course of the next few days, ‘2011’ and insert ‘2016’. Mr Howarth. Amendment 31, in clause 1, page 1, line 21, leave out ‘3rd April 2011’ and insert ‘a date to be set by regulations The Chair: I will now suspend the Committee until made by the Secretary of State by statutory instrument’. 3 pm. We will resume in Committee Room 10 in the Amendment 6, in clause 1, page 1, line 22, leave out House for line-by-line consideration of the Bill. ‘2011’ and insert ‘2014’. Amendment 15, in clause 1, page 1, line 22, leave out 2.37 pm ‘2011’ and insert ‘2016’. Sitting suspended. Amendment 32, in clause 1, page 2, line 2, leave out ‘3rd January 2011’ and insert ‘a date to be set by 3pm regulations made by the Secretary of State by statutory On resuming— instrument’. Amendment 7, in clause 1, page 2, line 2, leave out Clause 1 ‘2011’ and insert ‘2014’. Amendment 16, in clause 1, page 2, line 2, leave out REMOVAL OF ELIGIBILITY FOR CHILD TRUST FUND ‘2011’ and insert ‘2016’. Amendment 33, in clause 1, page 2, line 4, leave out Mr Hanson: I beg to move amendment 26, in ‘3rd January 2011’ and insert ‘a date to be set by clause 1, page 1, line 6, leave out ‘3rd January 2011’ and regulations made by the Secretary of State by statutory insert instrument’. ‘a date to be set by regulations made by the Secretary of State by Amendment 8, in clause 1, page 2, line 4, leave out statutory instrument’. ‘2011’ and insert ‘2014’. Amendment 17, in clause 1, page 2, line 4, leave out The Chair: With this it will be convenient to discuss ‘2011’ and insert ‘2016’. the following: Amendment 34, in clause 1, page 2, line 5, leave out Amendment 1, in clause 1, page 1, line 6, leave out ‘3rd April 2011’ and insert ‘2011’ and insert ‘2014’. ‘a date to be set by regulations made by the Secretary of Amendment 10, in clause 1, page 1, line 6, leave out State by statutory instrument’. ‘2011’ and insert ‘2016’. Amendment 9, in clause 1, page 2, line 5, leave out Amendment 19, in clause 1, page 1, line 6, after ‘2011’ and insert ‘2014’. ‘2011’, insert ‘, and after 3 January 2012’. Amendment 18, in clause 1, page 2, line 5, leave out Amendment 27, in clause 1, page 1, line 8, leave out ‘2011’ and insert ‘2016’. ‘3rd January 2011’ and insert Amendment 35, in clause 1, page 2, line 8, at end ‘a date to be set by regulations made by the Secretary of State by add— statutory instrument’. ‘(5) Regulations under this section may not be made unless a Amendment 2, in clause 1, page 1, line 8, leave out draft of the instrument has been laid before and approved by a ‘2011’ and insert ‘2014’. resolution of each House of Parliament.’. Amendment 11, in clause 1, page 1, line 8, leave out ‘2011’ and insert ‘2016’. Mr Hanson: Good afternoon, Mr Howarth. That was Amendment 28, in clause 1, page 1, line 14, leave out a brave attempt from the Chair to talk us out this ‘3rd January 2011’ and insert afternoon, just by listing the amendments. ‘a date to be set by regulations made by the Secretary of State by statutory instrument’. The Chair: Order. It is not the Chair who tables the Amendment 3, in clause 1, page 1, line 15, leave out amendments. ‘2011’ and insert ‘2014’. Amendment 12, in clause 1, page 1, line 15, leave out ‘2011’ and insert ‘2016’. Mr Hanson: It is the Chair who selects them. I welcome you, Mr Howarth, and your co-Chair, Mr Streeter, Amendment 29, in clause 1, page 1, line 17, leave out to the Committee proper. We have had some useful ‘3rd January 2011’ and insert evidence sessions. ‘a date to be set by regulations made by the Secretary of State by statutory instrument’. My hon. Friend the Member for Bristol East and I intend to introduce a fruitful discussion with these Amendment 4, in clause 1, page 1, line 17, leave out amendments, which are designed to be helpful to the ‘2011’ and insert ‘2014’. Government. It is always my intention to be helpful; Amendment 13, in clause 1, page 1, line 17, leave out I was as a Minister, and hope that I shall be as an ‘2011’ and insert ‘2016’. Opposition spokesman. For the avoidance of doubt, I Amendment 30, in clause 1, page 1, line 18, leave out state that the Opposition have extremely strong views ‘3rd April 2011’ and insert on the Bill. If our amendments to clause 1 are not ‘a date to be set by regulations made by the Secretary of State by agreed, we will vote against the clause, because we statutory instrument’. believe the child trust fund to be a valuable asset. We 129 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 130 Pregnancy Grant Bill [Mr Hanson] although I am not sure that I agree. On that basis, however, given that we are talking about a long-term want it to be maintained, even in its slimmed-down programme, would it not be advantageous to be able to form following its emasculation by the statutory instrument reinstate it in due course, when the deficit is reduced? that was made in July. Having said that, I am pragmatic and will give the Minister and the Government the Mr Hanson: My hon. Friend makes a valuable point. opportunity to reflect on our suggestions in this group All three sub-groups of amendments could give the of amendments. opportunity to do that. Amendment 26 allows the The amendments would do one of three things. The Minister, by regulation, to end the child trust fund at a lead amendment would give the Minister the opportunity later date, which provides an opportunity for him to to delay the implementation of the clause by order. reflect on the alternative. The date of 2014 gives a There are also amendments that would delay the ending three-year gap before the implementation of the measures of eligibility for the child trust fund until either 2014 or in the Bill. I accept that that has a cost, but in theory, it 2016. could allow for some reflection on the economic The first date of 2014 would allow for greater assessment circumstances over the next three years. The date of of the economic situation and of how the deficit reduction 2016 gives the opportunity for a total of five years plan was working before eligibility was ended. I will before implementation. The Minister, rather than using return to that point later. The second date of 2016 is the proposals to hit children’s future assets as part of after the final date for the next general election; helpfully, the deficit reduction plan, could look at how that plan the Government have stated that it will be on 6 May as a whole impacts on the economy and the Budget. 2015. That would allow Conservative Members—not That way, he would not necessarily have to use dogma Liberal Democrat Members, whom I exempt from this to end the child trust fund scheme because he did not charge—to seek a proper mandate for the abolition of agree with it. All three options give the Minister the the child trust fund, given their manifesto commitment opportunity to reflect on the current role of the deficit, on the subject. The last election was on 6 May 2010; the progress in lessening the deficit, the replacement for that is not that long ago, but they have already ditched the child trust fund and indeed, the commitments made the manifesto commitment as part of this Bill. The in his manifesto. second date gives Conservative Members an opportunity to reflect on upholding what they were elected to do. John Hemming: Earlier, the right hon. Gentleman I will also return to that point later. said that the Opposition would vote against the clause I start by discussing amendment 26, which would unless the amendments were accepted. Would they vote amend the Bill so that eligibility for the child trust fund for it if the amendments were accepted? was not cut off on 3 January 2011. It would give the Minister the flexibility to meet his objective of ending Mr Hanson: I would have to reflect on that. [Laughter.] the scheme—an objective that we oppose—at a date The hon. Gentleman asks a good question. If it meant that he sets, by means of regulations made by the that the Labour Opposition had amendments accepted Secretary of State. There are two reasons for the that put in place a stop-gap for the next nine months, I amendment. First, it gives the Minister the opportunity would reflect on whether to vote for the clause. At the to reflect on the evidence sessions and on the value of moment, we have nothing; the child trust fund will be the child trust fund for many sectors of our society. abolished. If it meant that we had a three-year gap Secondly, it is important that he reflects on the before abolition, I would certainly vote for the clause, in representations we have received on the gap that will the hope that the economic situation would improve occur between the ending of eligibility for the child and there would be some reflection. If we had a five-year trust fund and the introduction of the replacement ISA, gap, I would hope that, in a general election, we would which, on Second Reading, the Minister proposed be returned, and we would be able to unpick this introducing at some date before October 2011. He particular policy fiasco of the Government’s. could fill that gap in several ways, and I want to reflect My first comment to the Committee was that we on those in our discussion. He has announced a new oppose clause 1 of the Bill. I also said—as the hon. child ISA, and when he responds, I hope that he will Gentleman will see if he wants to look at Hansard give more detail and outline the nuts and bolts of that tomorrow—that I am pragmatic in these matters. I want proposed ISA. to see something of the child trust fund salvaged from There are effective ways of filling that gap at the this train crash. I believe, as the evidence sessions have moment, and amendment 26 gives the Minister the shown, that the fund is a valuable asset, helps develop opportunity to consider some of them. He could effectively assets for people at the age of 18—particularly the keep the lower payments of £50 in place for children poorest in our community—and has been valued by born after 3 January 2011, until the product is replaced those who have used it. It has also helped to develop a in due course with the child ISA. He could end Government savings culture as a whole. contributions but maintain the facility for parents to establish a child trust fund for children born after John Hemming: On the evidence sessions, obviously it 3 January. is not surprising that those who make a living out of providing child trust funds are enthusiastic about them Sheila Gilmore: The rationale that appears to have continuing. What I did not hear—I wonder whether the been given for the abolition of the child trust fund is the shadow Minister did—is any evidence that they were need to reduce the deficit. We have heard a great deal getting a good return, beyond the charges levied on it, from the Government about how, in their view, their or any evidence that people were saving any more than plans will reduce the deficit within a five-year period— they would have done otherwise. 131 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 132 Pregnancy Grant Bill Mr Hanson: The hon. Gentleman will reflect that any evidence that it has generated any additional savings, before the child trust fund, savings were at some 18%, particularly among the most disadvantaged groups? If and they have now risen to 31%. We had this discussion so, would he be prepared to put that before the Committee? when the original order was before Committee. There is different evidence as to how much people on lower Mr Hanson: I am grateful for the hon. Lady’s comments. incomes have been helped, but there has been, non- I have already said that empirical evidence suggests that contentiously, a rise in savings, including among people savings have risen, in the cohort, from 18 to 31% over on lower incomes. the period. There is no definitive evidence as yet as John Hemming: I thank the shadow Minister for regards the breakdown between the poor and more giving way again; he is being very generous with his affluent members of society, but there are certainly time. The Royal College of Midwives has argued that if poorer people who are saving, who were not saving a family on low income have money available, they before. That is an advantage for the scheme as a whole. should spend it on improving their health. Does he At the moment, for example, some £2 billion in assets disagree with that? is under control of the scheme, and £22 million a month in regular contributions is going into child trust fund Mr Hanson: Again, the hon. Gentleman is giving an accounts. We could argue all day about whether that and/or solution. There is a potential argument for people has moved from building societies, from banks or from spending their money on day-to-day living, but, equally, shares to child trust funds, but everybody who has given the child trust fund, as he will know, is not something to evidence to the Committee has said that there has been which individuals have to contribute. The Government success in raising the level of savings into child trust have been contributing to encourage savings, and people funds, and that that has had a material benefit in can, if they have resources in their pocket, put some in encouraging people, particularly those on the poorest for their children. Some do, and some do not. They can incomes, to consider saving, when they can afford to, also put nothing in at all and leave that initial Government for their children’s future. contribution to mature when the child reaches 18. They On amendment 26, I want to ask about the can opt in or opt out at different times in their financial implementation date of the scheme. It is quite clear cycle. It is a matter of choice. Individuals can choose from what we heard during the evidence sessions that when to put money into their children’s futures. What is nobody, including the Minister, expects the replacement uncontroversial from today’s discussions is that the scheme to be in place by 4 January 2011. In a press scheme generates greater saving across the board than release issued on 26 October 2010—for the sake of there had been before it came into effect. accuracy, at 17.55—the Minister stated: “The Government will now work closely with stakeholders to Yvonne Fovargue: Does my right hon. Friend agree finalise the structure of the accounts, and intends for the new that in Tuesday afternoon’s evidence session, people accounts to be available by autumn 2011.” who were not providers, such as 4Children and Scope, One of the key issues on which the Minister needs to agreed that it was absolutely too soon to abolish the reflect is the speed of the abolition of the child trust scheme? This group of amendments relate to that. fund and the replacement product that he is putting in Mr Hanson: Indeed. The scheme has been operational place in 2011. Amendment 26 would not stop the Minister for a relatively small number of years. The children who abolishing the child trust fund or eligibility for the child have child trust funds are relatively young because of trust fund, nor would it close down the scheme. It when the scheme commenced. I should perhaps have would not stop the Minister establishing the new scheme declared an interest, Mr Howarth, because I have four in autumn 2011. It would simply allow him to continue children, three of whom are older, but the fourth is aged the child trust fund scheme between 3 January 2011 and 7 and is in receipt of a child trust fund—I had them all whatever date he chooses to introduce the new scheme with the same wife, but that is another story. The key proposed in the press release. point is that there are individuals who have generated 3.15 pm savings that would not have been made before the child John Hemming: At some stage, it would be nice to trust fund came into place. There are people on lower clarify the right hon. Gentleman’s figures of 18% and incomes who are saving whatever they can, whenever 31%. On the point that I intervened on about delaying they can. That money is not lost to society; it is put the abolition of the scheme, I refer him to column 58 of away for the 18th year, when matriculation takes place. the Hansard report of the Committee’s proceedings on Claire Perry (Devizes) (Con): I agree with the right Tuesday 2 November; sadly, I was unable to attend. hon. Gentleman; we have heard a lot of evidence stating Marc Bush, who spoke on behalf of Scope, referred to that people do save into the scheme. We can debate his concern that people were losing benefits as a consequence statistics relating to how much poor families save, but of saving money in the child trust fund. Does the right the point that has not been proved at all is whether hon. Gentleman agree that that is a bad situation? Is it additional savings are being made. I have heard no not sensible to take a break and sort matters out, so that evidence that there is any additionality in the savings such situations do not occur? numbers, or that such savings would not have otherwise Mr Hanson: I do not accept that a break would be been made. We took evidence from a variety of experienced helpful. If we are trading contents of Committees, I witnesses, but there are numerous comments on the trade with him column 27 of the Committee Hansard Netmums website, for example, in which people have from 2 November. In response to my question, Mr Shaw asked what was wrong with saving into a bank account. said: People have commented that they would be saving “Therefore the investment in setting up a new product would in anyway and that the child trust fund was nice to have, effect be like starting from scratch. There is no legacy that you can but not essential. Has the right hon. Gentleman seen continue.” 133 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 134 Pregnancy Grant Bill [Mr Hanson] currently do. You would be abolishing the contribution, not the actual accounts.”––[Official Report, Savings Accounts and Health He also said: in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 16, Q37-38.] “I suspect most of my members would not be ready to provide a junior ISA by early January. The child trust fund itself is a The amendment would give the Minister time to think completely different animal to an ISA.”––[Official Report, Savings about that. Account and Health in Pregnancy Grant Public Bill Committee, What is the justification for abolishing the child trust 2 November 2010; c. 27, Q69.] fund when a parent whose child is born on 4 July next The amendment is designed not to tell the Minister not year, for example, could make a donation of £50 of to abolish the fund—although I hope that he does their own? That involves no Government contribution not—but to encourage him to have his alternative in or taxpayer funding, but it does involve a child trust place before the child trust fund is abolished, with the fund account. The mechanism is there because, as the nuts and bolts thought through. It is designed to encourage Minister has recognised, those of us who currently have him to present that alternative with clarity. What is the children who qualify for the child trust fund will still rush? have that resource tied up, and the computer system and reference numbers will be in place until those Sarah Newton: We also heard considerable evidence children matriculate at the age of 18. that over 100 products are available to parents or Why not continue with non-Government contribution grandparents who want a tax-free saving scheme for to the child trust fund, rather than establish a whole children. The right hon. Gentleman’s hypothesis that new product to deal with the issue—a product that will nothing will be available for parents who want to save not, in my view, help the poorer members of our society for the future simply is not true. We heard from the to save? A tax-free ISA is not important to them, but Institute for Public Policy Research this afternoon that the contribution of the child trust fund was. the most trusted financial services brand for the over-40s on low incomes is the Post Office. For the under-40s, the John Hemming: My reading of the Bill is that children most trusted brands are supermarkets. All those born before 3 July would be entitled to the provision, as organisations have well known tax-free savings products. long as an application is made within the next three months. Accounts are still going to be opened. However, Mr Hanson: I am grateful to the hon. Lady for her there is no massive urgency for the replacement. Children comments, but I believe that she misses the point of the will continue to be born, and they can apply retrospectively child trust fund. There is still a Government contribution, for a new account. If people are losing benefits as a albeit a reduced one, to help kick-start that fund. The result of the fund, the previous Government clearly scheme will be abolished on 3 January 2010, and no made major mistakes in its implementation. definitive scheme will emerge until perhaps autumn 2010. The Minister has said that those who want to Sheila Gilmore: I have read the section to which the participate in that scheme will be able to backdate hon. Gentleman refers—perhaps he was not actually contributions accordingly; that is fair enough. I am present and did not hear what was said. Mr Bush stated: simply asking: why have that hiatus? Why have that “child trust funds, particularly for disabled children, work so well gap? because there are no alternative savings products that work for The Minister could accept the amendment or, if it is families with disabled children, mainly because of the penalties flawed or not strictly correct—I have been a Minister that are inbuilt within the benefits system.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill and I accept that sometimes amendments do not work Committee, 2 November 2010; c. 58, Q161.] out exactly, and parliamentary counsel might need to look at the issue—he could come back on Report with a He then went on to say that people were afraid—wrongly, thoroughly thought-out measure that allows the abolition I think—that some officials misinterpreted the child of child trust fund contributions, eligibility and mechanisms trust funds as affecting benefits. Is not the solution to to occur on the date on which the new scheme comes ensure, perhaps with a minor amendment, that for into play. What is the rush? The cost will be relatively disabled children, child trust funds would not interfere minimal because contributions are lower than they were with benefits? It may well be that they do not, and that when the Labour Government were in power, due to an that was only a fear. Mr Bush’s evidence suggested that order passed earlier this year. Contributions are minimal. child trust funds were actually the best form of investment. On a point of principle, why not let the two schemes run into one? Mr Hanson: I am grateful to my hon. Friend for that point. In an evidence session this week, Tony Vine-Lott On Tuesday, Carl Emmerson of the Institute for said asked why, if we had a successful scheme, we Fiscal Studies mentioned an “extremely short consultation should tear it up at all. Tony Vine-Lott, director general period.” He said: of the Tax Incentivised Savings Association, said that “I do not think that it is possible to make decisions on how the child trust funds have been extremely successful with a policy should look and also ensure that the financial sector is geared up to operate a market of that size.” far higher take-up and should be continued. That is a quote from him, in the evidence session, in response to the idea of the Minister introducing a new Sarah Newton: Will the right hon. Gentleman give ISA scheme in October or November next year. He also way? said: “One option, which was what I thought the Government were The Chair: Order. Before the hon. Lady intervenes, I going to do back in June, would simply be to abolish the Government should say that, in the short time we have been meeting, contribution to the child trust fund but still allow families to open I have noticed that interventions have been getting a child trust fund with tax-free saving tied up to age 18, as they longer and longer. There is nothing wrong with 135 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 136 Pregnancy Grant Bill interventions. It is a good way of debating these matters, There are differences in the product. The Minister will but members of the Committee should be aware that not confirm, because he is still consulting, what product interventions should comprise a single point and a will replace the child trust fund while asking the Committee single question. to abolish the child trust fund under clause 1. Amendment 26, whatever its technical faults and the political principle behind it, simply says that if the Sarah Newton: Thank you for that reminder, Minister is going to abolish it, he should do so from the Mr Howarth. Does the right hon. Gentleman also recall date when the new scheme comes into operation. That that the IFS said that by far and away the most tax-effective would avoid all the confusion of two schemes being run way for parents to save would be with ISAs? at once and people not knowing what the final scheme is. It avoids the problem of backdating contributions Mr Hanson: That is all very well for those parents from the commencement of the new scheme to 3 January who pay tax. Not every parent pays tax. The hon. Lady 2011. I cannot understand why the Minister will not needs to reflect on the fact that the child trust fund was reflect on that. I am throwing him a ball to help him a universal benefit whereby a sum of money, admittedly achieve his objective of abolishing the child trust fund, now lower, would be paid in to help kick-start the even though we oppose that abolition. investment. 3.30 pm Yvonne Fovargue: On Tuesday, Anne Longfield said that the language of ISAs is confusing, does not relate Kate Green: It is interesting that Tony Vine-Lott told to the experience of most low-income families and us on Tuesday that one of the features that had been should be kept as simple as possible, which the child attractive to providers who had significantly entered the trust fund is. child trust fund market was the Government contribution. Is it not the case, therefore, that the Minister ought to Mr Hanson: Indeed. I accept what my hon. Friend be clear about how providers would respond to a product says. The key point, and this is genuinely trying to be that might or might not have a Government contribution? helpful to the Minister as I am not one to cause him Until that is known, he cannot proclaim the likely grief— commercial success of the junior ISA.

Mr Hoban: The right hon. Gentleman certainly has Mr Hanson: My hon. Friend makes a valuable point. not so far. I will provide the Minister with some statistics behind the figures. Currently, about 70,000 children are born Mr Hanson: Well, it is not for me to cause him grief, every month. If the scheme is abolished on 3 January but for the people who lose the benefit in due course 2011, it means that in January, February, March, April, and who will react against the policy. What is wrong May, June, July, August, September, possibly even October with just making sure that we continue to run the and November, approximately 70,000 children will be existing child trust fund mechanism beyond 3 January born each month who are not eligible for the child trust 2011, and he can then, by order, end that scheme on a fund. They will have to learn from their parents, date when the scheme that he is bringing forward is in retrospectively, about the new product, even though place? I cannot see the difficulty there. The Minister their parents may have different levels of educational may be able to help me again today. In his press release attainment and different information sources. They will of 22 October he said: have to learn from the Government, retrospectively, “Annual contributions will be capped”. about how they then put money into the fund under the Has he made a decision on what that cap will be yet? He Minister’s new ISA proposals. They may have not realised has not responded and I will certainly give way to him if that they can put money aside before those periods of he has made a decision on that. time. I contend that as many as 500,000 children could be disadvantaged, because they will not have been in the child trust fund and they will not necessarily have taken Mr Hoban: I know that the previous Government up the child ISA, because we do not yet know what the had their own way of making policy, but we are consulting child ISA is. and it would be wrong to pre-empt that consultation by deciding what the cap is now. I am sure that the right The amendment simply gives the Minister a chance hon. Gentleman would agree that good policy making to say, “On 1 October, this contribution”—much as I do is based on consultation. I may be diverging from past not want it to happen—“will end, and the new scheme practice but we want to consult with providers and will come into place on 1 October.” I will even give him stakeholders about the level of the cap. a commitment that I will not oppose the regulation’s passage through the House next June or July, so that he Mr Hanson: Perhaps the Minister could tell me exactly can agree to the date of 1 October and end the hiatus. how much consultation he had on the abolition of the What is the problem with that? I am compromising child trust fund because I do not think there was a great dramatically my beliefs and those of my hon. Friends in deal of consultation on that. Today is 4 November. offering the Minister that opportunity, because it will Clause 1 abolishes the child trust fund contributions ensure that children born from 3 January through to eligibility from 3 January 2011 without the Minister yet whatever date he issues his ISA will have a child trust being able to tell us what will replace it in any shape or fund contribution of £50. They will be able to establish form. I refer again to Mr Shaw who said: that and maintain the continuity that, sadly, the Minister “An ISA is run on an annual renewal basis, whereas a child wishes to throw up in the air and lose. I cannot see the trust fund is run as a trust for the child over a much longer argument against that. period.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 27, Q69.] John Hemming: May I put an argument against that? 137 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 138 Pregnancy Grant Bill Mr Hanson: How can I resist? Why is the Minister punishing future generations of children by abolishing the scheme in that three-year period when he could allow a much lower contribution? John Hemming: If a person has an account of £500, it The amendment gives him the opportunity to abolish earns £7.50 at an annual rate of 1.5%. If they have only the higher rate and would allow for a contribution £50, it is 75p, which most providers would run at a loss, rate over the next three years of £50 per child for the and I am not sure that providers would financially be 70,000 children who are born each month. That would able to cope with that. save a considerable amount of public resource, which is important, as the hon. Members for Congleton, for West Worcestershire, and for Devizes mentioned. He Mr Hanson: I hate to disillusion the hon. Gentleman, would save a considerable resource without abolishing but most providers are losing potential future clients the scheme. If, therefore, the economy picked up, he now. They will find great difficulty in maintaining the could either maintain the scheme beyond 2014, or consider existing infrastructure for the child trust fund from now returning to a higher rate of contribution to help alleviate to commencement. When we get to the clause stand poverty, and help asset-poor individuals at the age of part debate, I want the Minister to talk about how the 18. The scheme could be maintained for a three-year abolition of the fund will impact on the current providers period. of child trust funds. They provided the fund in good faith, in line with Government policy. The Minister has I accept that the proposal involves a cost of £31.5 million given a commitment to maintain the child trust fund for to £32 million a year. However, over the three-year people who paid into it, so that they can matriculate at period, that might be £100 million or £120 million, the age of 18. rather than the £500 million that the Minister is considering saving. It would help him to save—I am throwing this ball to him, so I hope that he picks it up and runs with Stephen Williams (Bristol West) (LD): The right hon. it—a considerable amount of public resource, but still Gentleman may recall the evidence session with Tony give him the flexibility to ensure that we have the Vine-Lott from the Tax Incentivised Savings Association. benefits of the savings culture about which we heard in I asked him to confirm that, for the remainder of the the evidence sessions. It would ensure that the mechanism child trust fund’s life—because, of course, the existing and infrastructure are still in place so that we can funds have not been abolished—they would still be continue to contribute. If the economy picks up—and charging annual fees. Although none of the witnesses we will fight an election on that in four years’ time— said yes, they all nodded. Mr Hoban: Five years. Mr Hanson: There has to be an element of financing for the operation of the scheme. That is understood. Mr Hanson: Four and a half now. If it picks up, the That has to be the case. By my estimates—I may be a Minister can reflect on the abolition of the child trust few hundred thousand pounds out either side—we are fund. If he does not accept the amendment, I will talking about a possible cost of around £31.5 million presume—and far be it from me to presume, because until October, plus the costs of maintaining the existing the Minister can speak for himself—that he is against child trust fund. In deficit reduction terms, that is not a the fund on the basis of dogma, not of deficit. He is great deal of money. It would ensure that the hiatus did against the fund because it is a Government contribution not happen and the Minister could introduce his scheme to help partnership with parents to secure assets for at the right time without damaging the child trust fund people who are asset poor at the age of 18 and will from 3 January. It would ensure that another 500,000 remain so unless he does something about it. If it is not children had some contribution towards their child dogma, he can save a large amount of public money by trust fund, and that many people, as mentioned by the accepting the lower rate, running it for three years until hon. Member for Truro and Falmouth, could contribute 2014, and maintaining the infrastructure of the scheme. to the fund over that period of time. I hope that the If the Minister did that, he would not have to start his Minister will reflect on that. new ISA. He could stop developing that, stop the hiatus Amendment 1 states that we should leave out 3 January with the new product, and maintain the existing child 2011 and insert 3 January 2014. Again, the Minister will trust fund at a lower rate of contribution. The Government know, because Government Members have indicated it, would not have to go through the mechanisms of Treasury that the next general election will be in 2015. It is quite officials developing a new ISA, talking to the market, possible for him, therefore, to accept the amendment; to throwing all the cards in the air and seeing how they examine the continuance of the child trust fund with land. He could maintain the current product for a much lower contributions of around £31 million or £32 million lower rate without abolishing the trust fund. a year—£50 for each person; to encourage that savings I have moved a long way on that, from opposing the culture over the next three years, and to consider how reduction of the £250 contribution in July to saying to the economy develops in that period. the Minister, “Here is an offer from the Opposition—have The Minister wants—and believes that they will—the the £50 rate, maintain the scheme, run it for three years, general deficit reduction measures, employment measures see how the economy picks up and, at the end of the and reductions in public spending to benefit the economy three years, if the economy is still going belly up, as a whole. We think that those measures might cause abolish it.” 500,000 jobs to be lost in the public and private sectors, but he presumably believes that the economy will get Fiona Bruce: Would a £50 contribution not produce better because of the medicine that the Government are the worst of all worlds for young people? The Labour giving it over the next three years. party has said that the one benefit for young people 139 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 140 Pregnancy Grant Bill whose families do not engage with the scheme is that he would have put in place a totally different product they at least have a nest egg at age 18. That contribution with a hiatus in between in which he would have reneged would not provide that. on his manifesto commitments. He would not have achieved what hon. Members—and they are honourable Mr Hanson: If the hon. Lady votes for clause 1, there Members—wish to do to meet the manifesto commitments will be no nest egg at the age of 18 for contributions to that got them into Government. be paid into; there will be a nest egg only for those people who can afford to put money into a tax-free ISA. Stephen Williams: The right hon. Gentleman seems Fifty pounds is not perfect—I do not want £50, and it is to be going back to points that he raised earlier in our not what the Labour Government did—but it is £50 considerations. He raised them on Second Reading, more than the hon. Lady will be voting for if she too. Perhaps the Labour party’s preferred alternative is supports the clause in due course. now to focus this fund on poor and disadvantaged children, or children with special educational needs and Kate Green: Is it not also the case that, by keeping in disabilities. Does he acknowledge that by the next general place a mechanism that allows for Government election £2.5 billion a year will be spent on precisely contributions, we could reactivate the mechanism to those groups in the form of the pupil premium? make a second payment at age seven? After the economy recovers, we might have the opportunity to resume the previous scheme. Mr Hanson: I think that I would be in danger of being called out of order if I were to stray on to the pupil premium. There is a major debate about that, and Mr Hanson: Indeed. By amending it to 2014, I am my hon. Friend the Member for West Ham feels particularly giving the Government an opportunity to reflect on the strongly about how it would affect her constituency. fact that they do not have to abolish the scheme to save money. The Minister could take a payment holiday for I remind the hon. Gentleman that he has a clear that three-year period. I do not necessarily think that position of integrity, and he is supported by his electorate. that is a great idea, but he could do that. He could He opposes the child trust fund and he said that he did maintain the structure of the child trust fund and wait in Bristol West. The hon. Member for Birmingham, to see how the economy develops. What is wrong with Yardley also went to his constituency and said that he that? What is the problem with taking a payment holiday opposed it. They are fulfilling their obligation in this and having a reduced figure while maintaining the Committee. I say to every other member of the Committee, structure of the child trust fund? Or does the Minister however, that they will not fulfil their manifesto obligations. not believe in the concept of a child trust fund? If that is Potentially, if I am honest, we are not now going to the case, he should tell us so. If the Bill is about deficit meet our obligations either, because we might even give reduction, I am offering him £350 million to £400 million ground to save—[HON.MEMBERS: “Ah!”] We are giving of deficit reduction by maintaining the scheme for the ground to salvage the potential for the child trust fund. next three years. The first thing that I said to this Committee is that we will oppose clause 1, because we think that it is wrong. However, I am giving the Minister the opportunity to Kerry McCarthy: Is it not also the case that, if the keep the child trust fund in place by looking either at a child trust fund’s structure were maintained, as the payment holiday, or at alternatives to the child trust economy recovers, and as the deficit is reduced, Government fund over that period of time. contributions could be phased in so that priority could be given to disabled or looked-after children? The Government could then move on to making payments 3.45 pm across the board. Sheila Gilmore: I appreciate that the alternative uses of the money might be outwith the scope of the Committee, Mr Hanson: My hon. Friend makes a valuable point. but will my right hon. Friend reflect on the fact that that I do not want to discuss it now, but we will table there is a real loss for children in Scotland, who will not amendments concerning looked-after and disabled children. be getting the pupil premium? We will also table amendments concerning the poorest children in society. I remind the Minister, because we will be moving on Mr Hanson: Not only poor children in Scotland. The to it in a moment, that the Conservative manifesto, on pupil premium is an England-only scheme. My constituency which eight members of this Committee stood, stated is in north Wales and the pupil premium will not apply that they would maintain child trust fund payments to there. If my hon. Friend the Member for South Down those in receipt of disability living allowance and maintain was here, she would say that the pupil premium will not payments for the poorest third of society. The Minister apply in Northern Ireland. The hon. Member for Bristol could take a three-year payment holiday in payments to West might want to speak for England, but we happen those groups, then look at the economy, and still go to speak for the United Kingdom. back to the electorate in 2015 and say that he had While I am on the topic—amendments have been maintained payments to the poorest third and to those tabled related to the devolved Administrations—the in receipt of disability living allowance. He would have Welsh Assembly Government tops up the child trust to admit that he took a payment holiday, because he fund with contributions. The proposal is to scrap the had difficulties with finances, but he could say that he scheme on 3 January. The six to seven months for which had restored the payments. If the mechanism is not in amendment 26 would provide would allow further place, the Minister will not be able to do that, because discussions to be held with the Welsh Assembly Government 141 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 142 Pregnancy Grant Bill [Mr Hanson] Amendment 10 proposes that we should replace the 2011 date with 2016. I have touched upon that already, on their contributions to the current child trust fund. but it is important that the Minister responds to the Indeed, a longer gap between now and 2014 could amendment. I tabled it because it would help Conservative achieve the same thing. Members to return to their electorates in 2015 having I again quote Anne Longfield, the chief executive of fulfilled their general election manifesto commitments. 4Children, from the evidence session on Tuesday. She I would not want the Minister to return to Fareham, or said: the hon. Member for Scarborough and Whitby to return to his constituency, and say, “Not only have we not “I think that we do have a structure here. There has been a massive investment in getting the information of to parents, and fulfilled our manifesto commitment, but we have done it is becoming very well known. For very little money that could the exact opposite of what we said we would do.” be maintained and built upon. If we change the system, we would The Conservative party manifesto for the general have to not only reinvest in a completely new mechanism, but election on 6 May said that the party would start to get that information out to others…there is much to be said for building upon what is already there and what already “cut government contributions to Child Trust Funds”, works.”––[Official Report, Savings Accounts and Health in Pregnancy as the Government did in July. The manifesto, however, Grant Public Bill Committee, 2 November 2010; c. 58, Q161.] had the important caveat—the Prime Minister held it in All I am doing is giving the Minister the opportunity to great esteem during his election campaign—that the do that. contributions would be cut “for all but the poorest third of families and families with disabled children”. John Hemming: Does the right hon. Gentleman agree The Committee will be given the opportunity to accept that it would be entirely possible, after consultation, to that principle later in our deliberations, but I am trying reinstate the system that currently exists, without the to ensure that the Minister and his esteemed colleagues, payment and without any break in entitlement? People for whom I have the greatest respect, look at the issue would merely have to apply a little later. and undertake to postpone the decision on the complete abolition of the scheme until 2016. If they accept amendments 26 or 10, they will be able to bring into Mr Hanson: I am trying to make my points. I believe effect a scheme that allows the poorest third of families that the Minister has an opportunity to reflect on the and families with disabled children to maintain a child amendments and not to abandon his principle regarding trust fund at a future date. The Minister would also be the abolition of the child trust fund. Under amendment 26, able to introduce a tax-free ISA scheme for people who he would abandon that principle for the next eight are not in those particular groups at that time. months until he has a replacement or, under amendment 1, he would abandon that principle until 2014, at relatively low cost, and then see whether the economy picks up. Stephen Williams: When the right hon. Gentleman Both approaches would maintain the child trust fund was a Minister, he was used to a system in which his infrastructure and both would represent an opportunity party had an absolute majority and could do whatever at least to avoid the disturbance that we have today. it liked. It did not, however, always honour its manifesto We are in danger of throwing the baby out with the commitments. Does he accept that this is a coalition bathwater. We have an incredibly successful scheme in Government and that the coalition agreement therefore which millions of families are saving that could be supersedes the manifestos of both parties? If the maintained at a relatively low cost. Indeed, hon. Members negotiations between my party and his had succeeded should not listen only to me. We have received evidence and a different coalition was in place, would he have in the past 24 hours from Save Child Savings, which thought it reasonable if a Conservative shadow Minister, comprises the Daycare Trust, the director of ResPublica, which is what my hon. Friend the Minister would have the IPPR, the London School of Economics, the Young been, had put the same point to him? Women’s Christian Association, the National Childbirth Trust, the Children’s Mutual, the chief executive of the Mr Hanson: There are many members of this Committee, Family and Parenting Institute, Scope and others. In its yet only two went into the election committed to the written evidence to the Committee today, it states: abolition of the child trust fund. None of the Conservative “The savings black hole of six months or more…would result”— or Labour members did that. It is a strange democracy in— indeed in which two members of a Committee ensure “an unnecessary hiatus — certain to damage consumers, the that the other 16 members have to do their bidding. industry and the UK’s already struggling savings culture”. Once upon a time, when I was leader of my local Rather than read all this into the record—it is already authority, we had 27 Labour members, 25 Conservative on record—Members can look at the correspondence members and three Liberal Democrats. Every time we from Save Child Savings. However, paragraph 2.1 states: had a discussion, we had to look to the three Liberal “Our request is simple — for legislative provision to be made Democrats to determine what the local authority’s final for the core CTF infrastructure of the tax-fee wrapper to continue policy would be. One Liberal Democrat always wanted to run, without state contribution”— to vote with the Tories, another wanted to vote with us, and the other could not make up their mind. I pay to ensure that— tribute to the two Liberal Democrat members of the “until the Government has finalised, legislated for and introduced Committee, because their position is totally consistent, its plans for a replacement savings product during 2011”— but I disagree with them. The Liberal Democrats the allowance infrastructure continues. I cannot understand returned fewer Members at this election than they had why the Government do not accept that request. in the previous Parliament. However, they have the 143 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 144 Pregnancy Grant Bill opportunity to tell the Conservative members of the John Hemming: I am pleased to serve under your Committee to ditch their manifesto commitment and chairmanship, Mr Howarth. I reiterate my declaration to tell the Labour members not to support the scheme of interest: I chair a company I founded many years ago that we introduced. that provides software for financial services providers, including those who provide ISAs. Claire Perry: In the real world, when facts change, I was attracted by the idea put forward by Save Child policies can change, too. The incontrovertible fact is Savings and others of just keeping the infrastructure that when we came into power as a coalition Government, going. In practice, however, we already know that we we were left a helpful note by the former Chief Secretary, will not stop opening accounts on 3 January, because the right hon. Member for Birmingham, Hodge Hill accounts will be opened over the next three months. (Mr Byrne)—[Interruption.] Labour members of the Clearly, the issue to be resolved is the practicality of Committee may all groan, but the fact is that there is no how to handle children’s savings without the £500 or money. We are prepared to change our policies to deal £250 from the Government, which makes a difference to with the new reality of the world, and I am surprised running those accounts. that the right hon. Member for Delyn is unable to do The Government are entirely right to have a consultation the same. process, because nobody will lose out from having a period of consideration before the new system is brought in. That new system might be the same as the old one, in Mr Hanson: If the hon. Lady is concerned that there the sense of the infrastructure and the computer systems, is no money, perhaps she will tell me why she has not or there might even be two different alternatives, with argued for raising the bank levy from £2.5 billion to one feeding into the ISA mechanisms and the other into £3.5 billion and thus getting an extra £1 billion. The the child trust fund mechanisms. The reality is that the continuation of the child trust fund will cost about investment for putting in place all the computer systems £130 million. If the hon. Lady is saying that we should has already been made by organisations such as the not put women and children first on the Titanic of our Children’s Mutual, which should be recognised. The financial situation, so be it, but I do not believe that that Revenue has its links to such systems, as it does to those should happen. The key point is that the amendments of the ISA providers. All that is in place, so there is no would allow us to keep the child trust funds so that the problem in switching it back on to allow people to open Government could honour the pledge in the Conservative accounts. party manifesto over the course of this Parliament. One good thing about the route of the child trust fund is that people are given a chitty—a piece of paper Sarah Newton: To save more of the right hon. with which they can open an account. Therefore, there Gentleman’s crocodile tears on my behalf, may I say to are none of the money-laundering problems that arise him that I am very confident about facing the people with opening other accounts. It is an easy process, but who sent me to represent them in Westminster and there is absolutely nothing that means that everything defending my record in five years’ time? has to be kept going. The current system opens up a default account, without any money. A lot of accounts Mr Hanson: I wish the hon. Lady every success. I am will have to be managed without money in them, and sure that she will do fine and that she will be able to there will also be a requirement to send a document on have a coalition with the Liberal Democrat who was, I children’s birthdays to say that they have no money. think, about 435 votes behind her. We will see which of That is not a good use of funds whoever is paying for them will be the next Member of Parliament for the them—whether a private provider or the Government. constituency and so from which half of the coalition Much as I was persuaded by the people citing evidence that Member will come. Indeed, there might be only one that it would be a good idea just to keep the process candidate, and she may be it. Perhaps she will be carried going as it is, having thought about it at more length through the streets of Truro and Falmouth, and acclaimed and remembering that this is one of the things in which by the Liberal Democrats who opposed her so fiercely I have been involved for many years, it is far better to only a few months ago. have a period of consideration during which we work out whether to use the infrastructure without the default opening of a bank account, because that is a bit silly. The Chair: Order. I think that fun time is over. We cannot just continue the process as it is, because that would just cause a massive problem without any funds Mr Hanson: I simply say to the hon. Lady that from the Government. Do we have both options, one manifesto commitments are important. The Liberal based on the ISA and one based on the infrastructure of Democrats have made theirs, as have the hon. Lady and child trust funds? The amendments set out the idea that others, and we have made ours. we should just keep things ticking over. I simply commend amendments 26, 1 and 10 to the Committee in the hope that I will allow enough time for 4pm the Minister—and, if they wish, my hon. Friends—to Sheila Gilmore: The hon. Gentleman seems to be contribute to this important debate. I am simply putting suggesting that a period of reflection is necessary to on record that it does not need be like this—there is an decide which mechanism to use. On that basis, is he alternative. The Minister has it in his power to accept suggesting that we should, in fact, accept amendment 26, any of the amendments, and therefore reflect the will of which would not abolish the entire child trust fund what we heard in the oral evidence sessions and—in due mechanism in January, but would allow it to continue course, I hope—that of the majority of the Committee. until such time as that period of reflection has gone I look forward to the Minister’s contribution. through and the Minister can put in an order? 145 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 146 Pregnancy Grant Bill John Hemming: Within the current law, if lots of intervention in the speech of the right hon. Member for empty accounts are opened when pieces of paper have Delyn, suggested that people on low incomes do not to be sent out each year, there are costs of maintaining understand ISAs. She might be interested to know that the computer systems, the database, postage and so on. 12 million people with incomes of less than £20,000 a It might be very good for the Royal Mail to have lots of year have ISAs. It is clear that the ISA is a product. It is pieces of paper floating around the country saying, a well-recognised brand. People understand exactly what “You’ve got no money”, but someone has to pay for it. it does and those on low incomes are prepared to save. Whoever has to pay for it has a difficulty that comes out of the infrastructure, which is supposed to benefit children, Yvonne Fovargue: The Minister might be aware of the but will not. evidence from Anne Longfield, which I believe he was We need to put a halt to opening new accounts. To not in his place for, when she stated, as the chief the extent that there is a process of consultation that executive of 4Children, that ISAs were confusing to identifies the best way forward, I will not support the low-income families. That was not my point; that was amendments. There might be a very good argument the point from Anne Longfield, who stated that there that such a system is the right infrastructure as long as was no need to produce another savings product, and we do not have the empty accounts, but we must stop that ISAs were confusing and had no benefit to low-income opening up accounts with no money in them. families.

Mr Hoban: It is a pleasure to serve under your Mr Hoban: I cite as evidence—we like to have evidence chairmanship, Mr Howarth. I will not be quite as in these Committees—12 million people on low incomes lengthy in my remarks as the right hon. Member for who do not find ISAs confusing, are quite happy to Delyn. We might want to leave some issues to a stand take them out and who understand them. They are a part debate, although I am not quite sure what they are well-established brand. One in five people on low incomes after his speech. Let me address the three sub-groups of have ISAs. That is a significant take-up and people do amendments. The right hon. Gentleman says that he is seem to understand them. For families there is a choice: pragmatic. He first produces a menu of choices for the there is a cash ISA and there is an equity ISA. The cash Committee. I am not sure which one of the three ISA is something that people will understand. choices he put before us he himself favours. We may see if he presses the amendments to a Division. Kerry McCarthy: The Minister has just said that one Lyn Brown (West Ham) (Lab): It is fairly obvious. in five people on low incomes have ISAs. Does he have any breakdown of whether they are older people, people Mr Hoban: The hon. Lady says that it is fairly obvious. with young children, or families and so on? Is there any I am not sure that it was fairly obvious from the analysis about the kind of person on a lower income 50-minute speech that we heard. who sets up an ISA account?

Mr Hanson: Will the Minister give way? Mr Hoban: I do not have that information to hand, but I suspect that a whole range of people on lower Mr Hoban: No. The right hon. Gentleman spoke for incomes have ISAs, whether they are families or older so long that we just want to move on to discuss the people. As was said earlier in the evidence session, amendments in substance and deal with some of the credit unions will say that people on low incomes are issues that have been raised. able to put money aside in accounts. I think that people understand the merits of saving. It is not appropriate to Yvonne Fovargue: Will the Minister give way? argue that that is a socially exclusive product. It is not. It is a very popular vehicle for saving money. Mr Hoban: If I can start off by dealing with the amendments, I might resolve the hon. Lady’s concern. Yvonne Fovargue: Will the Minister give way? Let me deal with the first ball that the right hon. Gentleman threw me, amendment 26. It is one of the Mr Hoban: If the hon. Lady would pause just for a three pragmatic options and suggests that we defer the moment, I appreciate that that may be difficult to date for implementation until the final details of a swallow, but people on low incomes do understand replacement of the junior ISA are pinned down. My ISAs very well. hon. Friend the Member for Birmingham, Yardley made a good point about the cost of simply keeping open, re-opening and opening accounts. We need to draw a Yvonne Fovargue: Will the Minister tell me which line on such matters. It is the case that we have had credit unions provide ISAs? I believe that they are initial discussions with providers. We issued a further precluded from providing ISAs under their rules at the consultation document on the day of Second Reading, moment. but I wish to clarify some issues that have been raised. The hon. Member for Stretford and Urmston, who is Mr Hoban: If the hon. Lady looks back at the record not in Committee, asked whether providers would be she will see that I did not say ISAs. I said that people interested in a junior ISA. It was clear from those to with credit union accounts are able to save money and whom I spoke when meeting stakeholders in July this do save money for their future. year that they were indeed interested in providing that. The right hon. Member for Delyn quoted Carl In terms of the appetite that there is in the savings Emmerson’s evidence to the Committee, who said that industry, it is clear that people are interested in providing there is an extremely short consultation period. Of the product. The hon. Member for Makerfield, in an course, he then went on to say that one response, once 147 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 148 Pregnancy Grant Bill we get to the stage of introducing these junior ISAs, That brings me to the next batch of amendments, the would be to backdate them. We accept that and think it first of which is amendment 1. These amendments is right to take that point on board. encapsulate Labour party policy, which is, “Let’s just put it off. Let’s just wait for another day. Let’s just wait Mr Hanson: Will the Minister clarify how, where, and see what turns up.” That is a Micawberish approach when and under what mechanism he will ensure that to economic policy. We recognise that we need to make individuals know about that backdating? If my child progress now. That is why we started to reduce the was born on 4 January 2011, and it is a contribution contributions with the statutory instrument in July. The from the parent, how will I know that the scheme is in Bill completes that process. This is the right thing to do. place? What is the mechanism, what is the cost and how We do not want to put off tackling the deficit because, is he going to do it? as the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) said, the cost of doing so would be borne Mr Hoban: There is a range of mechanisms that we by the poorest in society. We need to make progress can use to ensure that people are aware of them. If there now. There has been no suggestion from the Opposition are a large number of providers interested in providing about what the alternative might be. If we prolonged the accounts, they will market them—they will advertise the process, the money would have to be found from them. We do not have to go very far through a newspaper’s somewhere—perhaps through a reduction in the pupil money supplements on a Saturday or Sunday to find premium, through increased borrowing or through increased great adverts for ISAs. That shows to me that people taxation. I will not dwell on that. who want to promote them will advertise them or make This decision must be confronted. My hon. Friends them known. There are other mechanisms we can use, in the coalition are very supportive of taking difficult perhaps through the Consumer Financial Education measures now. I therefore do not think that deferring Body and the work that it does with expectant mothers, this measure until 2014 would be helpful. That proposal to remind them about the opportunity to open children’s suffers from the same defect as the last: that for the next ISAs, so there is not a shortage of ways to make this three years, CTF providers would find it economically known to individuals. I do not believe that there will be unviable to service accounts. It would be wrong for a hiatus. There will be the opportunity to continue those providers. The third batch of amendments, the promoting saving among young people. first of which is amendment 10, compounds that argument. We need to take tough action to tackle the deficit. Kerry McCarthy: Will the Minister give way? In his wide-ranging opening speech, the right hon. Member for Delyn forgot to mention amendment 19. Mr Hoban: I just want to make progress on the The Committee ought to consider it. He is an experienced concept of amendment 26 and putting off the end date Member of this House and, as he acknowledged earlier, for CTFs. The consequence of that is to continue the he used to be a Minister. If the Committee passed lower rate of contribution that we agreed in this place in amendment 19, it would require something that is medically July, in discussions with CTF providers. My hon. Friend impossible: it would require babies to be born twice. the Member for Birmingham, Yardley touched on that. The Bill would state that a child has to be born “before He commented on the return that people would get for 3rd January 2011” and “after 3 January 2012”. The opening a £50 account. I think he said something purpose of the amendment is not clear to me. I will try about 75p. to be helpful and pass him the ball, as it were, to rescue John Hemming: One and a half per cent. him from this problem. I think that he might be trying to realise the suggestion of the hon. Members for Mr Hoban: Yes. Of course, CTF charges are capped. Stretford and Urmston, for Makerfield and for Bristol With a £50 contribution, it would not be economically East—his fellow shadow Minister—of having a payment viable for many providers to continue to offer CTFs. All holiday, rather than deferring the end date for the CTF. three batches of amendments that the right hon. Gentleman I think that is why the amendment suggests a year’s gap tabled would make the accounts economically unviable in payments, but perhaps the right hon. Gentleman for providers. I therefore think that we are taking a would like to clarify its purpose. reasonable step. 4.15 pm John Hemming: I am concerned about people on Mr Hanson: If the hon. Gentleman can tell me that lower incomes. In the consultation process, will the every amendment he ever tabled in opposition was Minister look as hard as he can to find a mechanism to perfectly correct then I will take my hat off to him and ensure that one does not need a minimum amount of say well done. I have half a researcher dealing with these money to open an account? issues; the hon. Gentleman has the whole Treasury. The purpose of that amendment was to delay the abolition Mr Hoban: My hon. Friend makes an important for a further 12 months, which could have allowed the point. That is something we need to think about when Minister to have a payments holiday. If it is technically designing the scheme. I am clear that it should be as incorrect, the principle is still there. We still think that socially inclusive as possible. We must take into account we should not abolish the scheme and there is a range of families on low incomes that might not be able to put options in front of him which he appears to be rejecting. away a huge amount. I do not think that the arguments for deferring the Mr Hoban: So we have a fourth option. Either we end of the child trust fund are robust. I do not believe implement the end of this by statutory instrument or by that the first batch of amendments is sensible. We need January 2012, or January 2014 or January 2016. That is to make progress in saving taxpayers’ money because a veritable smorgasbord of options and we will be able we inherited a huge deficit. to make our decisions. 149 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 150 Pregnancy Grant Bill Mr Hanson: Let me remind the Minister that my first criticise me for being dogmatic about abolishing the option is to vote against clause 1, which we believe is the child trust fund, it would be very unfair to criticise him, wrong choice. But I am trying to be pragmatic to ensure as it was in his manifesto and agreement was reached in that we at least give him the chance to reflect on the the coalition negotiations to get rid of it? damage he will do and to look at how we could mitigate that. I will make him an offer. I will withdraw any or all of these amendments if he will look at them, take them Mr Hoban: My hon. Friend is being quite kind to me. to the Treasury officials, work on them and bring back It is a pragmatic decision that we had to reach given the the principle of any or all of them on Report. scale of the challenges that we face. When the Child Trust Funds Bill was debated in the 2001-05 Parliament, his hon. Friends were very principled. They voted against Mr Hoban: The problem is not so much the drafting it and they had a view about where that money would of the amendments—there is work that we can do to be better spent. We are making that decision now. We tidy them up, particularly amendment 19—but the principle are recognising that, given the financial situation that behind them. We need to tackle the Budget deficit. We we inherited, better ways exist of spending that money, are not doing this from dogma. As he will recollect from and that it is better to try to tackle the deficit than the excerpt from Hansard that he read out and our simply to lock up money until children are 18. It is lengthy debate on the programme motion on Tuesday, better to be able to spend the money in ways that will my right hon. Friend the Prime Minister referred to the help families now than to wait until their children are fact that he and my right hon. Friend the Chancellor 18. That is the challenge that we must acknowledge. served on the Committee that introduced the child trust fund. We are not doing this because we feel there is an ideological need to scrap child trust funds. We are doing Fiona Bruce: Dr Callan said during the evidence it because we need to sort out the mess that we have sessions that the scheme disproportionately favours the been left by our predecessors. That is what is driving middle class. If we are making judgments about priorities, this Bill— we need to consider how we can most benefit those who are most in need and vulnerable. The fund does not do Sheila Gilmore: Will the Minister give way? that.

Mr Hoban: Let me finish my point. We are trying to Mr Hoban: My hon. Friend makes an important tackle those problems and reduce the level of borrowing point. Returning to the evidence, in 2008-09, 13% of in this country so that we can keep taxes and interest low-income families contributed to a child trust fund, rates low. That is in the interests of everyone, particularly and 30% of better-off families did so. The average the poorest in society who are more vulnerable to the contribution of £23 was across all child trust funds held ebbs and flows of the economic tide. I will happily give by low-income families, but only 13% of those accounts way to the hon. Lady. received any additional contributions. We must take on board the point that my hon. Friend the Member for Sheila Gilmore: I am still unclear whether the Minister Birmingham, Yardley has made that there are better opposes the principle of child trust funds or it is simply ways to spend the money, which will tackle inequality because of the financial situation that he wants to and disadvantage among young people. abolish them. Some of his hon. Friends indicated in the evidence-taking sittings that ideally they would wish to Mr Hanson: My intervention may be helpful to the keep them. On that basis would it not be better to keep hon. Member for Congleton. Perhaps she will consider the mechanism in place so that when and if the economy voting for the next set of amendments, which restricts recovers in the way that he clearly expects it will, it will the child trust fund to the poorest third of society, as be possible to restore this provision, which, apparently, per the manifesto on which she stood. If we abolish and his party considers to be a good thing? do not accept the regulations through the amendments that we are considering, we will not be able to look at Mr Hoban: This is the problem. It is all very well to those later amendments in the same light. I hope that say that we should keep it going for a while but it means the Minister will consider how he can target the benefit that we will have to force providers to open accounts towards the poorest third of society, which is what the that will not be economic. It means that we will have to hon. Lady has just indicated that she supports. keep the system going in HMRC. We have a much better alternative, which is cheaper for the taxpayer, and Mr Hoban: I would love to discuss amendments 20, reflects some of the design features of the CTF that we 21 and 22, and perhaps we can move on to them shortly. approve of such as locking up savings until someone is We still have some time, and it would be good to cover 18 and allowing a range of people to contribute to that those amendments. I will make my arguments against product. Those are important matters. It would cost them at that point. probably about £2 million a year simply to keep the We need to find ways of helping the disadvantaged. CTF ticking over. I can think of much better ways to The question is whether it is better in current circumstances spend £2 million in HMRC, such as trying to tackle tax to perpetuate the child trust fund or to find a different evasion and things like that. I am sure that the hon. way of helping the disadvantaged. That is why we stick Lady would agree with me on that point. to the principle of the Bill, which is to scrap the scheme on 3 January 2011. It is not an easy decision for the John Hemming: Obviously, the Government will keep coalition Government to make, but it is the right decision the accounts that exist at the moment, so a certain to tackle the problems that we have. If the right hon. amount of the infrastructure will be there. Does the Member for Delyn chooses to press his amendments, I Minister not agree that, whereas it would be fair to would encourage my hon. Friends to oppose them. 151 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 152 Pregnancy Grant Bill Sheila Gilmore: There is an incoherence in what is change in relation to asset transfer. A number of people being said. On the one hand, the purpose is said to be gave evidence to us on that. The scheme is part of the saving money and paying down the deficit quickly, long-term thinking for reducing inequality and improving relying on the fact that that will turn the economy the future of children, particularly those from the least around. On the other hand, there is the question of well-off backgrounds. It needs to be given time to work. whether this is a good mechanism for helping poorer The stop-start, turn-the-tap-on, turn-the-tap-off approach families, for asset transfer, and for helping young people to dealing with problems has been particularly harmful to make decisions in their lives at important times. to this country’s social policy—all Governments can be Either it is a good policy or it is not, and I am hearing criticised for that—and, as a result, we rarely give social very mixed messages. At times, the message is that it programmes time to work to their conclusion. On child would be a good thing to do if we could afford it, but trust funds, we would have to wait some considerable that we cannot afford it at present. At other times the time, but there would be merit in enabling us to return scheme is criticised because it locks money away and to the issue and put more money into them in future. makes it unavailable, and it would be better for poorer I am confident that the economy will recover, but people if money were available. That would make sense there is an issue about exactly when that will happen, if the Bill stopped the child trust fund and gave an given the drastic deficit-reducing measures, which will, equivalent sum of money to such families now, but that in my opinion, increase, not reduce the deficit. Leaving is not the choice before us. The choice before us is to that aside, we all expect that a time will come when the abolish the child trust fund, with effect from January, economy will improve. We would then be able to pay without putting anything similar in its place. The money money back into provision for a generation of children. will not be spent on poorer families, because the only It is interesting to hear people making other proposals alternative that is suggested—it is not in the Bill at all, for what that money might or might not be used, but but we have devoted a great deal of time to it—is setting that is not what we are being asked to address today. We up something called junior ISAs. Junior ISAs are of no are not even being asked to address whether the money assistance in providing an incentive to save to families should go into the pupil premium, as suggested by the who do not pay tax. The attraction of ISAs for most Liberal party manifesto. Indeed, I have heard many people, including those on low pay who appear in the people suggest that the pupil premium will be financed tax bracket, is the tax relief available. For others, there by reductions in other parts of the education budget is little attraction other than putting the money into a rather than the budget that we are considering. We are Post Office account, or any other form of saving. The looking at whether we should retain child trust funds at ISA works for those who pay tax. Some people under all, or at least some form of mechanism that would 25 undoubtedly pay tax, but many people pay no tax allow them to be reopened, rather than having to reinvent at all. a completely new mechanism at some future point.

Mr Hoban: I appreciate that the hon. Lady is trying 4.30 pm to keep things going while the right hon. Member for Claire Perry: May I intervene? Delyn is not in his place, but does she not recognise that the provision is partly about attractive vehicles for The Chair: You cannot intervene when an hon. Member people to save whether they pay tax or not? ISAs are a has sat down, but you can make a speech. well-recognised brand for saving, which is why so many people on lower incomes use them. Claire Perry: Thank you, Mr Howarth. I did not know whether the hon. Lady had finished her speech. Sheila Gilmore: It will be interesting to see how many Perhaps it is because her constituency is not in England, people who do not qualify for tax relief will use ISAs but I felt that she was—as many of us are—confused by for saving. I suspect they will be few in number. In my the plethora of initiatives to help the poorest children experience, ISAs are attractive because tax relief is and families that the previous Government introduced. available, and I think that is the case with the vast They were initiatives that, given an unlimited supply of majority of people. money, which the previous Government believed that they had—[Interruption.] It is interesting that Labour Kerry McCarthy: Does that not go back to my earlier Members tend to groan whenever the notion of the point to the Minister that we need more information? If deficit is introduced, indicating that, while in opposition, he is to rely on the fact that one in five people on low they continue to think that the deficit is something that incomes take out ISAs, we need to know what sort of came out of the swamp, rather than something that people they are. Are they former taxpayers who worked, they created, but let us put that to one side as it is not but who are now on lower incomes? Are they older relevant to the Bill. people? Do they have families? If we look at that, we In an ideal world, the political ambition of throwing might have an idea of what sort of people will take up lots of money at a wall called “child poverty” and junior ISAs. I suspect that it will be people who have hoping that some of it sticks is a laudable one, which is used up their £10,600 or so adult ISA and who will see a a nice thing to have to justify in one’s constituency—unlike junior ISA as another way of saving money. the current situation that we have inherited. However, when times are tough, all Members should be looking Sheila Gilmore: That is an interesting point. People in for the highest value-added things that we can possibly those categories will find the ISA the most attractive do with every scarce tax pact. On both sides of the way of saving. The purpose of the child trust funds was House, we are committed to early interventions and to not just to provide an attractive form of saving to helping the most disadvantaged families in society. Even people who already could save, but to enable a step in leafy, rural Devizes, we have our fair share of poverty, 153 Public Bill CommitteeHOUSE OF COMMONS Savings Accounts and Health in 154 Pregnancy Grant Bill [Claire Perry] Child trust funds are also an encouragement for people to save. I have a lot of experience with low-income unemployment and families who desperately need Sure families, and financial products are difficult for them to Start centres and educational support for the most access. The understanding is not there. Banks are seen disadvantaged children. as an enemy in quite a lot of places; they are somewhere It is simply a question of what works best. Yesterday, that you put a suit on to go to. The child trust fund has we heard quite interesting evidence, from, for example, encouraged people to take up a financial product. As I the gentleman representing the credit unions, stating said, 74% of people take it up. I appreciate that that that what we need is a step change in lending and means 26% do not take it up, but 74% means it is a financial support for the poorest families. That has not much more successful financial product than any other been delivered, despite the best intentions, but we have on the market, including ISAs. had some creative thinking about using post offices as a Anne Longfield gave evidence that the poorest people potential channel, which could be extremely helpful in are contributing a higher percentage of their income as rural constituencies. a top-up to the child trust fund than the richer families, Given where we are—none of us came into politics to and that percentage means a lot. We are ingraining a be in this situation—all Members should be thinking habit. We all accept that people at different times of creatively about which pound delivers the most value their lives can save different amounts of money. That for our most disadvantaged children and families, rather percentage means something. Being able to put £2 a than putting up a blanket smokescreen of opposition to week away means a lot more to some families than reducing everything. We had conversations with some putting £200 a week away. Delaying this measure in of our witnesses whereby we tried to ask them what, if order to look at what we can do for the low-income we cannot have everything, the most valuable interventions families would have great value. are. Is it giving our poorest families a nest egg of £50? At the end of its term, the child trust fund provides Even when amortised at today’s relatively low interest an asset. The most compelling argument I heard today rates, that is, frankly, not a huge amount. We should was in the evidence from the United States that assets ensure that our poorest families have stable family give choices. Having an asset can change behaviour. It structures, access to excellent health care early in their gives people choices that they would not otherwise have, lives and a pupil premium that means that they are and we will be depriving children of choices. Perhaps I attracted to schools and that schools will actually want should declare an interest as my first grandchild is due to invest in supporting those families. in May, and she or he will be one of those lost children We should also ensure that our poorest families have who will not be there at the right time for the ISAs and an annual financial health check, because we have heard who will lose the child trust fund. Also, the fund means compelling evidence that it is not simply a question of engaging with financial institutions and seeing who can families not taking up their allocation for their child provide savings. We heard the credit unions say that trust funds because they do not know about it, or it is they no longer trust the Government’s processes, because difficult. In many cases, they are chaotic families for things are removed at short notice, as has happened whom the whole concept of saving and investment is with the child trust fund. I urge delay. For the families completely alien. that I see, I do not think that a financial health check One does not solve those problems by throwing money would help, frankly. They know that they do not have against the wall and hoping that some of it sticks. One enough; they know that they are in debt. solves it by tackling the issues, getting involved, ensuring that those families have far higher levels of support Fiona Bruce: Will the hon. Lady give way? than they have received before and that they are helped into sustainable employment, for example. Yvonne Fovargue: Not at the moment. I have nearly One of the other compelling things that we heard finished. from our trio of representatives was on single parenthood Families do not want to be reminded that they are in and women struggling to bring up families—one of the debt. It is known in the CAB as the “behind the clock” biggest issues around child poverty. Those are not women syndrome. I believe that the child trust fund encourages who will be accessing such financial products, no matter people to examine their financial circumstances. I strongly how much money we throw at them. They can be helped urge delay until we can consider an alternative product. so much more effectively in so many other ways. I will be happy to vote against the amendments. They are not a particularly effective use of the taxpayer’s Mr Hanson: I have two options—either to press the pounds. Our coalition agreement has set out far more amendment to a Division or to withdraw it. Having important ways of effectively tackling child poverty listened to the debate, I wish to press certain amendments, earlier in life. I urge all Members who care about child because I am compelled to consider the written evidence poverty and about our poorest families to vote against in memorandum SA 02 from Save Child Savings. The the amendments. respected organisations listed in paragraph 1.2 of that document have given evidence to us today, and they are Yvonne Fovargue: I support the amendments, but I considering the issue in the round. Save Child Savings am slightly confused. The child trust fund money, because alliance states: it is a voucher that is put into the account, is somehow, “scrapping the CTF infrastructure, as proposed in the Bill, will as Graeme McAusland said, seen as real money, whereas not only endanger the UK’s savings culture—at this highly challenging tax relief on ISAs is also money provided by the point in the economic cycle—but will also result in a lost generation Government. I would like to see some examination of of children” how much tax relief on the ISAs would be given to that the Minister has not planned for, before the summer families as well. of next year. 155 Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in 156 Pregnancy Grant Bill We need to examine such things in detail, and I wish Question put, That the amendment be made. to reaffirm, before we press the matter to a vote, that The Committee proceeded to a Division. none of the amendments are ideal. Amendments 26, 1 and 10 are ones that, in the real world, we would not John Hemming: May I repeat my point of order, wish to table. We wish to retain the integrity of the child Mr Howarth? trust fund scheme, even at the scaled-down level that the Minister has suggested, following consideration of the amendments in July this year. The Chair: Yes. In the interests of pragmatism, however, we are trying The Committee having divided: Ayes 6, Noes 9. to salvage something from a difficult situation in which Division No. 2] we face, under clause 1, the complete abolition of the fund and the ending of the infrastructure accordingly. AYES With that, I am minded to ask for votes on amendments 26, 1, and 10. Brown, Lyn Green, Kate Fovargue, Yvonne Hanson, rh Mr David Question put, That the amendment be made. Gilmore, Sheila McCarthy, Kerry The Committee proceeded to a Division. NOES John Hemming: On a point of order, Mr Howarth. Baldwin, Harriett Maynard, Paul As we will have several Divisions and we are all in the Bruce, Fiona Newton, Sarah room, is it possible to shorten the waiting time? Goodwill, Mr Robert Hemming, John Perry, Claire The Chair: It is possible if I get a signal from both Hoban, Mr Mark Sharma, Alok sides. Question accordingly negatived. Lyn Brown: No, I am not content, Mr Howarth. Amendment proposed: 10, in clause 1, page 1, line 6, leave out ‘2011’ and insert ‘2016’.—(Mr Hanson.) John Hemming: I was not talking necessarily about Question put, That the amendment be made. this Division, but about subsequent ones, because the The Committee divided: Ayes 6, Noes 9. same hon. Members will be voting in each one. Division No. 3]

The Chair: We will come to that later. AYES The Committee having divided: Ayes 6, Noes 9. Brown, Lyn Green, Kate Division No. 1] Fovargue, Yvonne Hanson, rh Mr David Gilmore, Sheila McCarthy, Kerry AYES NOES Brown, Lyn Green, Kate Fovargue, Yvonne Hanson, rh Mr David Baldwin, Harriett Maynard, Paul Gilmore, Sheila McCarthy, Kerry Bruce, Fiona Newton, Sarah Goodwill, Mr Robert Hemming, John Perry, Claire NOES Hoban, Mr Mark Sharma, Alok Baldwin, Harriett Maynard, Paul Bruce, Fiona Newton, Sarah Goodwill, Mr Robert Question accordingly negatived. Hemming, John Perry, Claire Ordered, That further consideration be now adjourned. Hoban, Mr Mark Sharma, Alok —(Mr Goodwill.)

Question accordingly negatived. 4.46 pm Amendment proposed: 1, in clause 1, page 1, line 6, leave Adjourned till Tuesday 9 November at half-past out ‘2011’ and insert ‘2014’.—(Mr Hanson.) Ten o’clock.