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. PUBLISHED BY AUTHORITY OF THE HOUSE OF COMMONS LONDON – THE STATIONERY OFFICE LIMITED £5·00 PBC (Bill 073) 2010 - 2011 Members who wish to have copies of the Official Report of Proceedings in General Committees sent to them are requested to give notice to that effect at the Vote Office. No proofs can be supplied. Corrigenda slips may be published with Bound Volume editions. Corrigenda that Members suggest should be clearly marked in a copy of the report—not telephoned—and must be received in the Editor’s Room, House of Commons, not later than Monday 8 November 2010 STRICT ADHERENCE TO THIS ARRANGEMENT WILL GREATLY FACILITATE THE PROMPT PUBLICATION OF THE BOUND VOLUMES OF PROCEEDINGS IN GENERAL COMMITTEES © Parliamentary Copyright House of Commons 2010 This publication may be reproduced under the terms of the Parliamentary Click-Use Licence, available online through the Office of Public Sector Information website at www.opsi.gov.uk/click-use/ Enquiries to the Office of Public Sector Information, Kew, Richmond, Surrey TW9 4DU; e-mail: [email protected] Public Bill Committee4 NOVEMBER 2010 Savings Accounts and Health in Pregnancy Grant Bill 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.