Savings Accounts and Health in Pregnancy Grant Bill

Public Bill Committee, 4 November 2010.

Gary Streeter (Conservative, South West Devon)

Good morning, witnesses, and welcome. Thank you very much for coming. As you probably know, this is the third sitting of the Committee, which is exploring the Savings Accounts and Health in Pregnancy Grant Bill. We are now going to hear oral evidence from the National Childbirth Trust, the Family and Parenting Institute and the Royal College of Midwives. May I ask witnesses to introduce themselves for the record?

Gary Streeter (Conservative, South West Devon)

Thank you. We are going to start with questions on the health in pregnancy grant.

Kerry McCarthy (Labour, Bristol East)

The criticism of the grant that is most often made is that it is paid quite late in a woman’s pregnancy. Do you think that there would be an advantage to bringing forward the date on which it is paid?

Kerry McCarthy (Labour, Bristol East)

In terms of what the grant is actually spent on, some suspicious minds on Second Reading suggested that women could not be trusted to spend it on their own health in pregnancy or for the benefit of their unborn child, and would spend it on handbags or haircuts or whatever. What is your evidence on whether people are using it wisely and sensibly?

Kerry McCarthy (Labour, Bristol East)

What you say about the grant being advance child benefit is very interesting, because we obviously do not dictate to people what they spend their child benefit money on. At the moment there is a debate about whether people who do not need child benefit, because their household income is higher, should be eligible for it any longer. What would you feel if the health in pregnancy grant went down a similar route, so that in effect it was means-tested by being linked to child benefit?

Gary Streeter (Conservative, South West Devon)

We need slightly shorter answers if we are to get through our agenda this morning. Dr Rake, do you have any responses to those three questions?

Kerry McCarthy (Labour, Bristol East)

I want to go back to what Belinda said about its being more useful to have an advance child benefit that is paid at a low weekly level. I am showing my ignorance now—would you be talking about £10 a week?

Kerry McCarthy (Labour, Bristol East)

There is a trade-off, though. Child poverty groups have debated whether it is best to boost weekly income or, as Save the Children argued, to give seasonal grants to meet certain kinds of lump sum expenditure. Obviously, if you are talking about food, a weekly amount is useful, but if you are talking about expensive items such as buggies or cots, a lump sum would be more useful. I do not know what Louise and Katherine think about this issue.

Kerry McCarthy (Labour, Bristol East)

Although if it was like an advance child benefit, it could be done through the same mechanism.

John Hemming (Liberal Democrat, Birmingham, Yardley)

Obviously nobody is saying that paying the health in pregnancy grant is a bad idea. The question is how best to deal with the process of pregnancy and giving birth. From listening to you, it is obvious that there are things that lump sums have to be spent on. Perhaps bringing forward the payment of the maternity grant prior to birth would be a useful thing to look at. If we assume for the purposes of discussion that the health in pregnancy grant will go, what we are saying is that there are lump sum things around birth for which funds are needed. Would it therefore be useful to bring forward the maternity grant?

John Hemming (Liberal Democrat, Birmingham, Yardley)

I was thinking of the equipment side of it first, before I went on to the issue of health. You referred in particular to micronutrients being important. There is evidence on that, and you can give precise information later. It strikes me that we should look at maternal health throughout pregnancy. Would considering a way of getting nutritional supplements to people be a sensible approach?

John Hemming (Liberal Democrat, Birmingham, Yardley)

So things like folic acid—

Gary Streeter (Conservative, South West Devon)

Final question, John.

John Hemming (Liberal Democrat, Birmingham, Yardley)

Can I have a final question after this one? If this is the final question, I will ask a different one.

Gary Streeter (Conservative, South West Devon)

This is the final question.

John Hemming (Liberal Democrat, Birmingham, Yardley)

What evidence is there that the payment of the health in pregnancy grant over the last year has had an effect on the health of the baby in particular?

Gary Streeter (Conservative, South West Devon)

Dr Rake wanted to come in on the question. It might be helpful, colleagues, if you ask one person to answer your question expressly.

Gary Streeter (Conservative, South West Devon)

We may need shorter answers. I am so sorry, but we have a lot to get through. Kate Green.

Kate Green (Labour, Stretford and Urmston)

Can you take us a little bit further in the health issue and preparing for pregnancy? One of you referred to the fact that preconception is also an important issue. Would you also agree therefore that we need to be addressing the incomes of all women of child-bearing age to ensure that they are able to conceive, from the position of being able to afford a healthy diet and so on?

Kate Green (Labour, Stretford and Urmston)

Thank you. That is really helpful and although it is a bit beyond the scope of the Bill, it is useful to have on the record.

May I ask one other question, which is probably for Louise? What is your assessment of the importance—or perhaps it has not been an essential feature of the health in pregnancy grant—of the linking to checks and appointments with the health professional?

Sarah Newton (Conservative, Truro and Falmouth)

There is no one around this table who would not agree with the aspirations behind the measures, or with what you have said about the importance of maternal health and the impact on babies and future generations. The issue concerns the best way to target the limited resources that we have to deliver the best possible outcomes. That is especially important for mothers and babies, and families, on particularly low incomes.

I want to follow up on some of the things that Belinda has discussed about Healthy Start. That seems to have been a good programme, which is starting to tackle a lot of the issues to which you referred about pre-conception—right from the earliest stage of conception—and ensuring that mums-to-be, especially those on low incomes, are supported through a range of services. As you have said, that has to be linked to some sort of health professional, be it a community midwife, a health visitor, or somebody at a Sure Start centre. A whole range of services must support mums, and their partners and families, who are on low incomes, giving them benefit advice, for example. Much of that care goes on for years after the baby has been born.

I am interested in ideas about how we can build on what is a good programme, linked into the new investments that the Government are making in primary care, in Sure Start centres and in health visiting, to reach the objectives that were identified, but in a different way.

Sarah Newton (Conservative, Truro and Falmouth)

At the moment, the vouchers are targeted at nutrition—vitamin supplements, milk, fresh fruit and vegetables—to supplement very low incomes, where women cannot afford the cost of a healthy diet, if we accept the Joseph Rowntree Foundation report, which I think is accurate. You were talking about voucher extensions into some other areas—you could look at equipment. Instead of a cash lump sum, there could be vouchers for people to meet the, as you say, very high cost of a pram, a cot or clothing.

Alison McGovern (Labour, Wirral South)

I have two questions. They are probably for Katherine, but I am not entirely sure. I wanted to get a sense of the scale of cost increases. What would be the typical costs of prams, maternity clothes, equipment, medicines, that sort of thing? Katherine, you said that pregnancy can bring about poverty. Could you say a little about the scale of that?

My second question was for Louise. You mentioned a French model. Are there are any other examples from the rest of Europe or the world of how they do this differently? Where will we be putting ourselves if we pass the Bill, in terms of the aspiration that we all share of supporting families in Britain? Will we be ahead of or behind the pack after the Bill?

Gary Streeter (Conservative, South West Devon)

If you have empirical evidence from other countries that might benefit the Committee, it would be helpful to send it to the Clerks so that it can be properly circulated.

Fiona Bruce (Conservative, Congleton)

Following on from the discussion about the positive and targeted work of the Healthy Start scheme, which meets the needs of the most vulnerable and those on the lowest incomes, at a time of scarce public resources, how does paying a health in pregnancy grant to families on higher incomes help?

Fiona Bruce (Conservative, Congleton)

I understand many of your points. Because we do not have a magic wand, as you said earlier, we are having to make difficult decisions, and the importance of targeting limited funds on those who most need help is surely just and right.

Fiona Bruce (Conservative, Congleton)

Or possibly broaden the Healthy Start scheme?

Yvonne Fovargue (Labour, Makerfield)

I want to return to the use of the voucher. What evidence do you have of the percentage of people who use the voucher, as opposed to the percentage of people who would use the cash? I am concerned about stigmatising mothers and pregnant women when we do not do that with any other benefits.

Claire Perry (Conservative, Devizes)

I would like to declare an interest, having had three children—two in America and one here. I have an interesting perspective on both health systems.

I would like to return to the evidence base. I agree with Fiona that the idea of supporting mothers and foetal nutrition is incredibly important. I also accept Katherine Rake’s point about the long-term benefits of ensuring that we have healthy conceptions and healthy pregnancies. What evidence is there about which nutrients have the most benefit for the foetus and the mother? What evidence is there that this grant is being spent on delivering those appropriate things?

Alternatively, is this grant effectively a bribe to encourage people to seek health advice at a point when they might need it for reasons other than their pregnancy? I have always been concerned that 25 weeks is far too late to start talking about foetal nutrition—things are pretty much done and dusted at that point. Perhaps it is not just about the money. As we have heard this morning, there are concerns about what we can spend our limited public resources on. What other interventions might make a difference? Are health visitors the best people to deliver this advice, and should we be supporting them to get access to the poorest families? In a world where money is constrained, what is the best way to get help to the women who really need it to improve their nutrition?

Claire Perry (Conservative, Devizes)

But they can be prescribed in pill form. I have experience of being given folic acid supplements before conception.

Claire Perry (Conservative, Devizes)

Given that I think we all support the idea that this is not just about dishing out pills, is there evidence that the health in pregnancy grant is spent on achieving a healthier diet? Have you seen any evidence that people who receive the £190 spend it on healthy food and/or radically change their diet or lifestyle as a result of that intervention?

David Hanson (Labour, Delyn)

Just one question for any witnesses who wish to answer: I recognise that it is early days, but have you any anecdotal evidence about the take-up of health advice by for women prior to the grant at the 25th week, and about the take-up of such advice at the 25th week now that the grant is in place, as a result of it being linked to healthy advice?

David Hanson (Labour, Delyn)

Perhaps I can turn the question around and into a different direction. If clause 3 is agreed to and the grant is abolished, do you expect pregnant women’s contact, at the 25th week, with the health service and with health advice to increase or decrease over the next few years?

David Hanson (Labour, Delyn)

So in the absence of the grant, do you expect the inequality between income groups to increase or decrease in relation to health advice?

Sheila Gilmore (Labour, Edinburgh East)

Katherine began to touch on the issues of long-termism. A criticism of all Governments is the failure to build in the long term. Are you aware of the cross-party report that was produced by Graham Allen and Iain Duncan Smith on early intervention? Do you feel that the health in pregnancy grant, or any of the provisions that we are dealing with today—you mentioned the child fund trust—would help to contribute to that long-term preventive agenda?

Sheila Gilmore (Labour, Edinburgh East)

Do you think that the particular issues that we are dealing with contribute to that agenda?

Gary Streeter (Conservative, South West Devon)

That takes us nicely on to our second set of questions on the child trust fund and long-term saving and thinking.

David Hanson (Labour, Delyn)

I will start with you, Katherine. Can you outline your understanding of the objectives of the child trust fund? Do you think, with the evidence to date, that those objectives are being met and are valuable?

David Hanson (Labour, Delyn)

Do you have any specific statistics on the figures relating to, perhaps, the poorer third of households?

David Hanson (Labour, Delyn)

Do you have evidence of whether that is new saving or, indeed, just a transferred saving?

David Hanson (Labour, Delyn)

So is it your view that the Government contribution was a catalyst to encouraging saving among the poorer elements of society?

David Hanson (Labour, Delyn)

Clause 1 of the Bill proposes the abolition of the child trust fund contributions from 3 January. The Government announced on Second Reading that they were going to introduce a junior ISA, which they expect to bring in some time between July and October next year. Do you have any understanding yet of what the junior ISA involves—its mechanisms, its contributions and how it would operate? Have you had to make an assessment to date of whether it will fulfil the functions that the child trust fund, which is being abolished by the Bill, did?

David Hanson (Labour, Delyn)

Whatever your views on the actual abolition on 3 January 2011, given what you have said, do you think that there is an argument for a delay in the changeover?

John Hemming (Liberal Democrat, Birmingham, Yardley)

Earlier you were saying that it was very important when somebody has just given birth to feed well and make sure you are healthy. The Institute for Fiscal Studies was saying that it would be better for low-income families to spend that money on their health at that time, rather than putting it in savings that are locked away until the child is 18 years old. What would your comment be on that?

John Hemming (Liberal Democrat, Birmingham, Yardley)

Obviously, it is well known that grandparents sometimes put money aside for their children, but I asked what you would do, given that you do not have the money to do both. Would you spend the money on healthy eating or saving?

John Hemming (Liberal Democrat, Birmingham, Yardley)

What the IFS said about families is that if they have spare cash and they are on very low incomes, they would be better spending that money on day-to-day living and healthy eating, rather than saving it. Do you agree or disagree?

John Hemming (Liberal Democrat, Birmingham, Yardley)

I am asking about what families should do. Should they save the money or spend it on healthy eating?

John Hemming (Liberal Democrat, Birmingham, Yardley)

I am getting the answer “Spend it” from Louise, and Katherine and Belinda are not answering the question. Is that right?

John Hemming (Liberal Democrat, Birmingham, Yardley)

But which should you do—one or the other?

Gary Streeter (Conservative, South West Devon)

John, you have asked the question, let them answer it in their own way.

Gary Streeter (Conservative, South West Devon)

Thank you. That is a very important point.

Alison McGovern (Labour, Wirral South)

I want to come back to the point raised with us by the IFS, and specifically to direct it at you, Katherine. It was asserted that the child trust fund was not the most beneficial policy for the Government to have, because in the circumstances of having a low income the most rational thing to do is not to save. But you seem to be saying, “Well, hang on a minute, that’s not necessarily the case, because saving, like exercise, is habit forming,” and that the best policy for the Government might be to encourage low-income families to save. What evidence do we have of the effectiveness of the child trust fund policy? Is the IFS right that what the Government ought to do to support low-income families is to improve services rather than to promote saving, which, it asserts, is “irrational behaviour” in those circumstances?

Alison McGovern (Labour, Wirral South)

So the IFS’s point is contestable.

Fiona Bruce (Conservative, Congleton)

One of my concerns about the child trust fund’s effectiveness is that although, as you said, a key aim was to trigger better saving behaviour, one in four of the children who are eligible for the funds has no active contact with the benefit of improved education. Is that a success, bearing in mind my concern that a large proportion of that quarter are probably those families who need advice, help and support the most?

Fiona Bruce (Conservative, Congleton)

At a cost of £0.5 billion a year, I wonder whether that money is being spent most effectively, particularly as it is tied up for 18 years. Perhaps we could look at focusing some funds more effectively on better financial education in schools, where we would capture a broader range of young people.

Fiona Bruce (Conservative, Congleton)

Absolutely; I do not disagree with that. It is about the enormous amount of money—the billions and billions of pounds—that are put into this scheme. Some of those young people will have an expectation of some money, and we need to look at helping the most needy and most vulnerable with the limited resources that we have.

Kate Green (Labour, Stretford and Urmston)

One of the principles of the child trust fund was that it was universal. However, it was a progressive form of universalism in that poorer people got more, and disabled children also received a higher payment from the Government. There has been considerable discussion during earlier evidence sessions about the way that a lump sum could be delivered to looked-after children, who obviously have no family of their own to save for them.

Given all that we have heard about the straitened financial times that we are in, do you think that the vehicle is flexible enough to be tweaked for the short term to focus money more on the most disadvantaged children, without destroying the whole structure? Or, do you think that it has to stay as it is, and cannot have rearrangements within it?

Gary Streeter (Conservative, South West Devon)

Colleagues, are there any more questions for these witnesses on this subject? Witnesses, thank you for your expert evidence. It is much appreciated. Huge thanks to Louise Silverton, Belinda Phipps and Katherine Rake.

David Hanson (Labour, Delyn)

On a point of order, Mr Streeter. Can I ask your advice on an important matter that you and Mr Howarth might wish to consider? This is the third evidence session that we have had to date in this Committee, and in none of those evidence sessions has the Minister attended either to listen to the evidence or ask questions of the witnesses.

As a Minister myself during the previous Government, I sat through such sessions for a number of Bills, listened to the evidence and asked questions of the witnesses on behalf of the Government. Will you and Mr Howarth consider—although I know that the Minister is entitled not to attend—whether we could raise with Mr Speaker the general principle whether, as a courtesy to you as the Chair, the witnesses who attend and the Committee members, Ministers should attend these sessions and listen to the evidence?

Today in particular, we have heard some extremely good evidence that will not be printed in Hansard until after we have considered some of the relevant clauses this afternoon. Will you and Mr Howarth consider those points, and perhaps also reflect whether we should give the Minister the courtesy of listening to his evidence when he will not listen to the evidence of other people who are putting valid points about the policies that he is pursuing in the Bill?

Gary Streeter (Conservative, South West Devon)

I thank Mr Hanson for his point of order. As he probably knows, attendance at these sessions is for individual Members to decide, as long as we are quorate, and we have been quorate throughout. He has put his point on the record. My advice is that it is not something for me to take up with Mr Speaker. He might want to find other ways of raising the point in this place. However, I am grateful to him for placing his point on the record.

David Hanson (Labour, Delyn)

I am grateful for your response, Mr Streeter. I might indeed try to find ways of raising the issue, perhaps after business questions or in a letter to Mr Speaker.

Gary Streeter (Conservative, South West Devon)

I am sure that the right hon. Gentleman will do precisely that.

George Howarth (Labour, Knowsley)

I welcome the witnesses who have kindly agreed to give evidence today. It would be helpful if you could introduce yourselves individually before we commence the proceedings.

George Howarth (Labour, Knowsley)

Thank you very much. David Hanson, do you wish to start?

David Hanson (Labour, Delyn)

Welcome to another of our witness sessions. We are nearing the end now, but I hope that you can contribute to our discussion in a fruitful way. I would like to start by asking about the objectives of the child trust fund and whether you think that they have been met. The first objective was to encourage a general saving culture, particularly for those on lower incomes. The second objective was to put in place an asset for all children at the age of 18. May we start with Sian from Toynbee Hall? Is the child trust fund meeting those objectives?

David Hanson (Labour, Delyn)

Mr Dolphin or Dr Callan, do you dissent from that view in any way, shape or form?

David Hanson (Labour, Delyn)

Dr Callan?

David Hanson (Labour, Delyn)

Is it less effective than, for example, the proposed Government alternative, which is a tax-free ISA that will not necessarily encourage poorer people to contribute?

David Hanson (Labour, Delyn)

The two are not necessarily mutually exclusive, but we can range across that another day, Mr Howarth.

I am particularly interested in your assessments—just short, pithy comments on this, if possible, so that colleagues can come in—of the impact of ending the child trust fund, particularly on what I would call more vulnerable groups such as looked-after children, children and young people with disabilities, and those in the poorest one 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 those groups.

David Hanson (Labour, Delyn)

So would you advocate ending the child trust fund for looked-after children and children with disabilities as well?

John Hemming (Liberal Democrat, Birmingham, Yardley)

There are two key questions to do with the child trust fund. The first was raised by the Institute for Fiscal Studies. Is there any evidence that doing it this way has encouraged saving such that there is a real benefit to having the money locked in for 18 years? It is obviously a positive thing for grandparents to be able to lock the money away until the child is older. Is there any evidence that it has encouraged additional saving?

John Hemming (Liberal Democrat, Birmingham, Yardley)

That is one aspect. The second aspect is that, in a sense, money is often tighter for the low-paid than it is for people on benefits. The IFS and Louise Silverton of the Royal College of Midwives have argued that given that maternal health is very dependent on having cash now, they would advise people who really had tight finances not to save money until their child is 18 but to spend it now on improving their health and lifestyle. What is your view on that?

John Hemming (Liberal Democrat, Birmingham, Yardley)

I am talking about the families themselves saving the money, not about the state spending money. The question is, if families have spare money, should they spend it now or lock it away for 18 years?

John Hemming (Liberal Democrat, Birmingham, Yardley)

I am asking whether you would advise a family in that situation to lock the money away for 18 years.

John Hemming (Liberal Democrat, Birmingham, Yardley)

So you are saying that people who are on benefits—as I have said, they often have a bit more disposable income than those on a low wage—have perfectly enough money to feed themselves adequately, and therefore they have spare money to save.

Kate Green (Labour, Stretford and Urmston)

Dr Callan, I absolutely agree with you about the importance of financial education and the range of policies that we are deploying to support people in low-income households in particular. It was suggested to us in an earlier evidence session that one way of engaging young people with financial education was to do it when they had a lump of money that was theirs. That would enable them to think about their savings and spending habits in a way that had some reality for them. To what extent do all the witnesses think that giving a young person aged 18 a lump of money will support their engagement in financial education, particularly in their teen years?

Kate Green (Labour, Stretford and Urmston)

Aren’t you concerned, Dr Callan, to address the inequality in asset holding, which feeds through to inequality in opportunity for young people at age 18? With all its imperfections, delivering a lump sum to young people at age 18—and a larger lump sum, in terms of the Government’s contribution for the poorest 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 playing field when young people reach age 18.

Kate Green (Labour, Stretford and Urmston)

How would that work for looked-after children? Whom would you be educating to provide for the child in that case? If the state does not deliver a lump sum to the looked-after child, who will?

Harriett Baldwin (Conservative, West Worcestershire)

The background to the Bill is the country’s huge financial deficit, and not having the child trust fund saves the Government £500 million a year. Obviously, there are difficult choices to be made with these types of schemes. Everyone here would agree that this is a nice-to-have scheme. It is obviously appealing, and we have heard a lot of evidence about its appeal. I am going to read out a list of seven Government policies that help to try to ensure that children have a good start in life. I want to ask the witnesses whether they would put the child trust fund ahead of these other choices: protecting the NHS budget; increasing the number of health visitors; free prescriptions for pregnant women; the Healthy Start programme, which gives vouchers for milk and fruit to certain categories of people; the £500 Sure Start maternity grant for the first child; extending nursery education for disadvantaged two-year-olds to 15 hours; and the pupil premium. Would the witnesses want to make the case that the child trust fund is more valuable than any of those?

George Howarth (Labour, Knowsley)

Before the witnesses answer that question, it is slightly outside the scope of the Bill to be making comparisons. I understand the point that you are making, but it is beyond our scope to debate the merits of a series of other policies. While I am happy to allow the witnesses to answer the question, we do not want to start a debate on the relative merits of a whole series of other policies. I am sure they will find an adroit way of answering the question that satisfies you and me.

Harriett Baldwin (Conservative, West Worcestershire)

I would just like to highlight the fact that those policies were mentioned by the Minister on Second Reading.

George Howarth (Labour, Knowsley)

Sure, but that does not necessarily bring it within the scope of the Bill. There is a lot more licence on Second Reading than in Committee. I am not overruling the question; I am merely saying that we need to be a bit careful in how we develop the theme.

Sheila Gilmore (Labour, Edinburgh East)

One of the issues that successive Governments have been criticised for is not taking a long-term view of how you resolve these problems. Those people who have advocated early intervention also said how important it is that we have consistent long-term policies, not short-term policies. I am thinking, in particular, of the recent cross-party work by Graham Allen and Iain Duncan Smith on early intervention and the importance of taking a long-term view. To what extent is the child trust fund able to contribute to that long-term perspective?

Fiona Bruce (Conservative, Congleton)

Dr Callan, the statistics show that one in four young people have families who are not engaging with the process. I would be very interested to know whether you have evidence for something you said. It has been my suspicion that those on the lowest incomes and those who most need to engage in financial education are the ones who are not doing so. What evidence do you have for that?

Fiona Bruce (Conservative, Congleton)

Thank you. You also indicated that one of the best investments in a young person’s life, and perhaps one of the best ways of tackling future inequalities, is to give sound financial advice. Do you feel that we do that adequately?

Fiona Bruce (Conservative, Congleton)

One more question, if I may, Mr Howarth? The child trust funds cost us £500 million a year. Some witnesses have given the view that, despite its being a universal benefit, much of the money, potentially millions of pounds, goes to young people who already have a nest egg, but that is a price worth paying, so children from low-income families receive what you called a “handout” at 18, although they may have had no engagement with the process on the way. Do you think that that is a price worth paying, or should we be looking to invest the money differently, or at least invest what money we have, bearing in mind our financial constraints?

Fiona Bruce (Conservative, Congleton)

Thank you.

Yvonne Fovargue (Labour, Makerfield)

I have two questions. I understand that the child trust fund provides an asset, but, equally, it is supposed to get engagement with financial institutions. We have heard that a lot of parents do not engage with financial institutions—there is a fear of them. Do you feel that by 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 lose their fear of financial institutions?

Yvonne Fovargue (Labour, Makerfield)

Can we return to the asset base? What evidence is there, if any—including that from other countries—of the difference that holding an asset makes to behaviour at age 18? Does having an asset make a difference? Do people behave differently when they have one?

Yvonne Fovargue (Labour, Makerfield)

Yes.

George Howarth (Labour, Knowsley)

Thank you. I will bring in Paul Maynard to ask the last question on this section and then I will move on to the saving gateway. I think Kerry McCarthy will be asking the first question about that.

Kerry McCarthy (Labour, Bristol East)

I am doing the health in pregnancy grant.

George Howarth (Labour, Knowsley)

Sorry, it was Sheila Gilmore.

We have very little time left to cover the rest of the Bill, so I request those asking questions on the next section—and, indeed, asking the last question on this section—to make them well-targeted and short. It is not that you have been prolix in your responses, but could the witnesses please bear that in mind?

Paul Maynard (Conservative, Blackpool North and Cleveleys)

My question is very much to the point. What role has the child trust fund played in the financial education of children at primary school level?

Paul Maynard (Conservative, Blackpool North and Cleveleys)

That is why I said primary school level.

George Howarth (Labour, Knowsley)

I didn’t realise that my words would have such a profound effect.

Sheila Gilmore (Labour, Edinburgh East)

I want to ask about the saving gateway, with which I understand that Sian, in particular, has been involved. Would you start by saying what that involvement was and what your view is of the saving gateway proposal?

Sheila Gilmore (Labour, Edinburgh East)

What is your view of the saving gateway as a means of assisting low-income families to save for the future?

Sheila Gilmore (Labour, Edinburgh East)

One of the criticisms that was made on Second Reading was that, in the pilots at least, there was limited involvement from providers, which limited access and the outlets or inlets for people to go to. One of the proposals was that the link could have been made with post offices. I was interested in your comments on ease of access being critical.

Sheila Gilmore (Labour, Edinburgh East)

Some supermarkets have post offices.

George Howarth (Labour, Knowsley)

Does anyone have anything further to add?

Kate Green (Labour, Stretford and Urmston)

I just wondered whether you could specifically comment on how important having a matching mechanism in the saving gateway was, and whether it was necessary for the matching level to be pitched at the level that it was? If it had been lowered, would it still have attracted some positive behaviour?

Sheila Gilmore (Labour, Edinburgh East)

I might be completely wrong, but my understanding was that the range of people who were allowed to take part in the saving gateway 2 pilot was quite wide. It included not only people who were eligible through being in receipt of certain benefits, but people who received quite high incomes. It included individuals who earned up to £25,000 and families who earned up to £50,000. I can see how the potential shift that you described might happen, with people saying, “I won’t put the money in the Post Office or the bank. I’ll put it in the saving gateway because that is giving me a better rate of interest.” However, my understanding was that the saving gateway rollout would apply only to people on benefits, who do not have those sorts of choices.

Kerry McCarthy (Labour, Bristol East)

How successful does each of you think the health in pregnancy grant initiative has been?

Kerry McCarthy (Labour, Bristol East)

Is Sian’s experience of people getting the health in pregnancy grant in Tower Hamlets that they spend it on spa treatments?

Kerry McCarthy (Labour, Bristol East)

The suggestion has been made by Samantha that the payment at 25 or 26 weeks is too late in the day. Presumably you think that if it is still paid, it should be paid earlier?

Kate Green (Labour, Stretford and Urmston)

This morning we heard from other witnesses that in the later stages of pregnancy women might spend the money on other things to get ready for the baby. We had evidence from the National Childbirth Trust, for example, that its second-hand shops were busy with mums-to-be spending that money on prams and things that they would need when the baby first arrived. It has perhaps been an unfortunately named grant. What would be your perception of its efficacy in supporting mothers at a time when costs might rise? Do you feel that it is the right timing to try to help with some of that extra expenditure or would something earlier or later have been preferable?

George Howarth (Labour, Knowsley)

Before the witnesses answer, to enable us to get through all of the business in the required time it might be as well to take two questions together and then to ask the witnesses to reply accordingly.

Sarah Newton (Conservative, Truro and Falmouth)

Are the witnesses aware of the Healthy Start programme, which is well supported by health care professionals and is very much targeted at maternal health? If so would they like to comment on its effectiveness?

Kate Green (Labour, Stretford and Urmston)

The other point I wanted to develop was on the healthy diet. As I say, I feel that the grant is not particularly helpfully named, but what we also heard this morning was that by delivering an extra lump of money to families, it supported particularly low income families to spend their income in other ways, including on the essentials of diet, heating the home and that kind of thing. Given that I think Sian has said that perhaps some of these benefits could have been more targeted, do you see a place for extra financial support in the late stages of pregnancy that enables families to meet the outgoings that are associated with being a mum-to-be?

George Howarth (Labour, Knowsley)

We have now exhausted the questions, and no doubt we have exhausted the witnesses, too. Before I close this session, is there anything that any of the witnesses want to say—they should by no means feel obliged to say anything—that they feel they have not had the opportunity to say in answering our questions? If there is, they should feel free to do so as briefly as possible.

George Howarth (Labour, Knowsley)

Thank you very much. We will now move on to the next set of witnesses.

George Howarth (Labour, Knowsley)

The Minister needs no introduction to the Committee on the grounds that he is a member of it, but perhaps Mr Little would like to introduce himself.

David Hanson (Labour, Delyn)

Good afternoon, Mr Little. May I start by asking you, Minister, what you have learnt from the evidence sessions that might help to influence you over the next two days’ consideration of the Bill?

David Hanson (Labour, Delyn)

I want to focus on a couple of key issues about the successor product to the child trust fund, because that would be key in our consideration if we were taking away a particular provision. What is your assessment of the concerns of Martin Shaw in the evidence session, regarding the establishment of the junior ISA?

David Hanson (Labour, Delyn)

In relation to both the gap, and the cost of the investment.

David Hanson (Labour, Delyn)

We have been told this week in evidence sessions that as well as the press release you put out on the Second Reading debate, consultations are going on, even this week, for the first time with providers, about a replacement for a scheme that will end on 3 January. Do you think that it is fair to end the scheme before consideration has been given to nailing down all the nuts and bolts of the replacement scheme for that date?

David Hanson (Labour, Delyn)

What is the cost of establishing the junior ISA?

David Hanson (Labour, Delyn)

Can you give us a figure?

David Hanson (Labour, Delyn)

Perhaps you can clarify that for the Committee. The contributions to the child trust fund have already been reduced, so the cost of abolishing the contributions and the fund from January is not £500 million a year.

David Hanson (Labour, Delyn)

Could you indicate to the Committee the cost of this Bill ending on 3 January 2011?

David Hanson (Labour, Delyn)

Exactly. So the £500 million figure that has been bandied about the Committee in relation to this Bill is not accurate. Is that correct?

David Hanson (Labour, Delyn)

But could you confirm that the cost of this Bill is less than £500 million, and is about £50 million a year?

David Hanson (Labour, Delyn)

Exactly. I just want it on the record, because colleagues in the Committee have been quoting the £500 million figure, which is not correct.

David Hanson (Labour, Delyn)

Can I just ask one final question, Mr Howarth? What weight do you give to manifesto commitments in policy decisions?

David Hanson (Labour, Delyn)

For the record, Minister, could you say what your party’s manifesto commitment on the child trust fund was at the general election?

David Hanson (Labour, Delyn)

Could you then therefore—

George Howarth (Labour, Knowsley)

Order. Mr Hanson, you asked to have one final question not a penultimate question.

David Hanson (Labour, Delyn)

My final question then is what would be the cost of maintaining the child trust fund as per your manifesto commitment?

John Hemming (Liberal Democrat, Birmingham, Yardley)

Much as we argued to scrap the child trust fund in the manifesto, what has not arisen in evidence is a question about whether the model of the child trust fund without funding from the Government 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 allow people to open new child trust fund accounts with no money?

John Hemming (Liberal Democrat, Birmingham, Yardley)

In essence, because the junior ISA will have lock in as well, there is nothing to be gained by people in having the child trust fund model?

Yvonne Fovargue (Labour, Makerfield)

On the junior ISA, we have heard comments in the evidence session that it will benefit higher rate taxpayers, but that it will not be of benefit to low-income non-taxpaying families. Would you like to comment on that?

Yvonne Fovargue (Labour, Makerfield)

In the evidence sessions yesterday, some of the witnesses—particularly those from, I think, 4Children—were saying that the measures would increase inequality. What are your comments on that?

Yvonne Fovargue (Labour, Makerfield)

You have mentioned that there has not been enough time to conduct an impact assessment. Have you considered delaying this until you can have an impact assessment on all the proposed measures?

George Howarth (Labour, Knowsley)

We have two more topics to cover in this evidence session, and two other Members—Sarah Newton and Sheila Gilmore—have indicated that they want to ask questions on this topic, but they will have to be very brief.

Sarah Newton (Conservative, Truro and Falmouth)

My question is a good bridge to the next one, which is on the saving gateway. With regard to promoting savings, especially among people on low incomes, who traditionally do not save, we have heard a lot of evidence about the importance of access to the places where they save. We have found universally that they need a local and trusted organisation that offers value-for-money products. Given the coalition Government’s commitment to the post office network, which is welcome, what discussions have you had with colleagues about developing low-cost financial services through that network?

George Howarth (Labour, Knowsley)

We will now move on to the saving gateway.

Sheila Gilmore (Labour, Edinburgh East)

Both the saving gateway and child trust fund are long-term policies designed to encourage people on low incomes to save and facilitate them to do so. Rather than just saying that because many providers were not prepared at the outset to come in on it, did you give any consideration to allowing it to get started so that you could build up a network? You mentioned one or two potential changes, such as the credit unions’ discussions with post offices. Rather than saying, “Let’s not have it”, why not allow it to start and to build up once people see it begin to work?

Sheila Gilmore (Labour, Edinburgh East)

Given the restrictions on the roll-out of saving gateway, I do not think necessarily that the pension savings is an alternative. One of the merits of a saving gateway, particularly in relation to credit unions, was the incentive to save. The ability of credit unions to build up their savings and thereby improve access for people in some communities, which do have credit unions—admittedly, not all have yet—to cheap forms of credit is one of the things that can make a huge difference not just to people’s income, but their not getting into debt and not having to borrow at times of crisis. Do you not agree that to enable that to happen is particularly important if we want people to be able not to fall into a cycle of debt?

Fiona Bruce (Conservative, Congleton)

What has come across to us from several witnesses is that financial education, particularly for young people, is patchy. I wondered whether your work on this Bill has led you to consider how we could improve on that in light of the fact that the financial savings education element, say of the child trust fund, is going. It has also been pointed out that only three out of four young people’s families engage with the savings education element of that, so we have one out of four 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. Have you considered how we can improve our service to young people to give them the best start in life in terms of financial management?

Kerry McCarthy (Labour, Bristol East)

During the evidence sessions that we have had, one of the main points of criticism—to the extent that there was any criticism—was the fact that it is not targeted sufficiently. It would be a better use of money if it was means-tested and went to families who need the money most. Was that under consideration at any point when you looked at introducing the Bill? You are obviously going down the road of means-testing child benefit to an extent. Many people see the health in pregnancy grant as an advance on child benefit before the child is born. Was the possibility of using that money more wisely under consideration, rather than axing the whole thing entirely?

Kerry McCarthy (Labour, Bristol East)

But there are no other payments available to pregnant people that are rising to compensate for this being axed.

Kerry McCarthy (Labour, Bristol East)

Such as?

Kerry McCarthy (Labour, Bristol East)

Several people said on Second Reading that you cannot trust women to spend it on the right things—you can’t trust them to spend it on their own health in pregnancy or on things for their unborn child. If that is the case, why are we not far more prescriptive about other benefits that are paid to people, such child benefit and winter fuel allowance? Are you suggesting that we go down the road of vouchers for everybody?

Kerry McCarthy (Labour, Bristol East)

But you are saying that that is a criticism—the fact that it can be spent on things that it is not designed to be spent on?

George Howarth (Labour, Knowsley)

Harriet Baldwin.

Harriett Baldwin (Conservative, West Worcestershire)

The Minister just replied to the point I was going to raise.

George Howarth (Labour, Knowsley)

Is there anything further you would like to say to the Committee, Minister?

George Howarth (Labour, Knowsley)

I will now suspend the Committee until 3 pm. We will resume in Committee Room 10 in the House for line-by-line consideration of the Bill.

Clause 1

David Hanson (Labour, Delyn)

I beg to move amendment 26, in clause 1, page 1, line 6, leave out ‘3rd January 2011’ and insert

George Howarth (Labour, Knowsley)

With this it will be convenient to discuss the following:

Amendment 1, in clause 1, page 1, line 6, leave out ‘2011’ and insert ‘2014’.

Amendment 10, in clause 1, page 1, line 6, leave out ‘2011’ and insert ‘2016’.

Amendment 19, in clause 1, page 1, line 6, after ‘2011’, insert ‘, and after 3 January 2012’.

Amendment 27, in clause 1, page 1, line 8, leave out ‘3rd January 2011’ and insert

Amendment 2, in clause 1, page 1, line 8, leave out ‘2011’ and insert ‘2014’.

Amendment 11, in clause 1, page 1, line 8, leave out ‘2011’ and insert ‘2016’.

Amendment 28, in clause 1, page 1, line 14, leave out ‘3rd January 2011’ and insert

Amendment 3, in clause 1, page 1, line 15, leave out ‘2011’ and insert ‘2014’.

Amendment 12, in clause 1, page 1, line 15, leave out ‘2011’ and insert ‘2016’.

Amendment 29, in clause 1, page 1, line 17, leave out ‘3rd January 2011’ and insert

Amendment 4, in clause 1, page 1, line 17, leave out ‘2011’ and insert ‘2014’.

Amendment 13, in clause 1, page 1, line 17, leave out ‘2011’ and insert ‘2016’.

Amendment 30, in clause 1, page 1, line 18, leave out ‘3rd April 2011’ and insert

Amendment 5, in clause 1, page 1, line 18, leave out ‘2011’ and insert ‘2014’.

Amendment 14, in clause 1, page 1, line 18, leave out ‘2011’ and insert ‘2016’.

Amendment 31, in clause 1, page 1, line 21, leave out ‘3rd April 2011’ and insert ‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 6, in clause 1, page 1, line 22, leave out ‘2011’ and insert ‘2014’.

Amendment 15, in clause 1, page 1, line 22, leave out ‘2011’ and insert ‘2016’.

Amendment 32, in clause 1, page 2, line 2, leave out ‘3rd January 2011’ and insert ‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 7, in clause 1, page 2, line 2, leave out ‘2011’ and insert ‘2014’.

Amendment 16, in clause 1, page 2, line 2, leave out ‘2011’ and insert ‘2016’.

Amendment 33, in clause 1, page 2, line 4, leave out ‘3rd January 2011’ and insert ‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 8, in clause 1, page 2, line 4, leave out ‘2011’ and insert ‘2014’.

Amendment 17, in clause 1, page 2, line 4, leave out ‘2011’ and insert ‘2016’.

Amendment 34, in clause 1, page 2, line 5, leave out ‘3rd April 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 9, in clause 1, page 2, line 5, leave out ‘2011’ and insert ‘2014’.

Amendment 18, in clause 1, page 2, line 5, leave out ‘2011’ and insert ‘2016’.

Amendment 35, in clause 1, page 2, line 8, at end add—

David Hanson (Labour, Delyn)

Good afternoon, Mr Howarth. That was a brave attempt from the Chair to talk us out this afternoon, just by listing the amendments.

George Howarth (Labour, Knowsley)

Order. It is not the Chair who tables the amendments.

David Hanson (Labour, Delyn)

It is the Chair who selects them. I welcome you, Mr Howarth, and your co-Chair, Mr Streeter, to the Committee proper. We have had some useful evidence sessions.

My hon. Friend the Member for Bristol East and I intend to introduce a fruitful discussion with these amendments, which are designed to be helpful to the Government. It is always my intention to be helpful; I was as a Minister, and hope that I shall be as an Opposition spokesman. For the avoidance of doubt, I state that the Opposition have extremely strong views on the Bill. If our amendments to clause 1 are not agreed, we will vote against the clause, because we believe the child trust fund to be a valuable asset. We want it to be maintained, even in its slimmed-down form following its emasculation by the statutory instrument that was made in July. Having said that, I am pragmatic and will give the Minister and the Government the opportunity to reflect on our suggestions in this group of amendments.

The amendments would do one of three things. The lead amendment would give the Minister the opportunity to delay the implementation of the clause by order. There are also amendments that would delay the ending of eligibility for the child trust fund until either 2014 or 2016.

The first date of 2014 would allow for greater assessment of the economic situation and of how the deficit reduction plan was working before eligibility was ended. I will return to that point later. The second date of 2016 is after the final date for the next general election; helpfully, the Government have stated that it will be on 6 May 2015. That would allow Conservative Members—not Liberal Democrat Members, whom I exempt from this charge—to seek a proper mandate for the abolition of the child trust fund, given their manifesto commitment on the subject. The last election was on 6 May 2010; that is not that long ago, but they have already ditched the manifesto commitment as part of this Bill. The second date gives Conservative Members an opportunity to reflect on upholding what they were elected to do. I will also return to that point later.

I start by discussing amendment 26, which would amend the Bill so that eligibility for the child trust fund was not cut off on 3 January 2011. It would give the Minister the flexibility to meet his objective of ending the scheme—an objective that we oppose—at a date that he sets, by means of regulations made by the Secretary of State. There are two reasons for the amendment. First, it gives the Minister the opportunity to reflect on the evidence sessions and on the value of the child trust fund for many sectors of our society. Secondly, it is important that he reflects on the representations we have received on the gap that will occur between the ending of eligibility for the child trust fund and the introduction of the replacement ISA, which, on Second Reading, the Minister proposed introducing at some date before October 2011. He could fill that gap in several ways, and I want to reflect on those in our discussion. He has announced a new child ISA, and when he responds, I hope that he will give more detail and outline the nuts and bolts of that proposed ISA.

There are effective ways of filling that gap at the moment, and amendment 26 gives the Minister the opportunity to consider some of them. He could effectively keep the lower payments of £50 in place for children born after 3 January 2011, until the product is replaced in due course with the child ISA. He could end Government contributions but maintain the facility for parents to establish a child trust fund for children born after 3 January.

Sheila Gilmore (Labour, Edinburgh East)

The rationale that appears to have been given for the abolition of the child trust fund is the need to reduce the deficit. We have heard a great deal from the Government about how, in their view, their plans will reduce the deficit within a five-year period— although I am not sure that I agree. On that basis, however, given that we are talking about a long-term programme, would it not be advantageous to be able to reinstate it in due course, when the deficit is reduced?

David Hanson (Labour, Delyn)

My hon. Friend makes a valuable point. All three sub-groups of amendments could give the opportunity to do that. Amendment 26 allows the Minister, by regulation, to end the child trust fund at a later date, which provides an opportunity for him to reflect on the alternative. The date of 2014 gives a three-year gap before the implementation of the measures in the Bill. I accept that that has a cost, but in theory, it could allow for some reflection on the economic circumstances over the next three years. The date of 2016 gives the opportunity for a total of five years before implementation. The Minister, rather than using the proposals to hit children’s future assets as part of the deficit reduction plan, could look at how that plan as a whole impacts on the economy and the Budget. That way, he would not necessarily have to use dogma to end the child trust fund scheme because he did not agree with it. All three options give the Minister the opportunity to reflect on the current role of the deficit, the progress in lessening the deficit, the replacement for the child trust fund and indeed, the commitments made in his manifesto.

John Hemming (Liberal Democrat, Birmingham, Yardley)

Earlier, the right hon. Gentleman said that the Opposition would vote against the clause unless the amendments were accepted. Would they vote for it if the amendments were accepted?

David Hanson (Labour, Delyn)

I would have to reflect on that. [ Laughter. ] The hon. Gentleman asks a good question. If it meant that the Labour Opposition had amendments accepted that put in place a stop-gap for the next nine months, I would reflect on whether to vote for the clause. At the moment, we have nothing; the child trust fund will be abolished. If it meant that we had a three-year gap before abolition, I would certainly vote for the clause, in the hope that the economic situation would improve and there would be some reflection. If we had a five-year gap, I would hope that, in a general election, we would be returned, and we would be able to unpick this particular policy fiasco of the Government’s.

My first comment to the Committee was that we oppose clause 1 of the Bill. I also said—as the hon. Gentleman will see if he wants to look at Hansard tomorrow—that I am pragmatic in these matters. I want to see something of the child trust fund salvaged from this train crash. I believe, as the evidence sessions have shown, that the fund is a valuable asset, helps develop assets for people at the age of 18—particularly the poorest in our community—and has been valued by those who have used it. It has also helped to develop a savings culture as a whole.

John Hemming (Liberal Democrat, Birmingham, Yardley)

On the evidence sessions, obviously it is not surprising that those who make a living out of providing child trust funds are enthusiastic about them continuing. What I did not hear—I wonder whether the shadow Minister did—is any evidence that they were getting a good return, beyond the charges levied on it, or any evidence that people were saving any more than they would have done otherwise.

David Hanson (Labour, Delyn)

The hon. Gentleman will reflect that before the child trust fund, savings were at some 18%, and they have now risen to 31%. We had this discussion when the original order was before Committee. There is different evidence as to how much people on lower incomes have been helped, but there has been, non-contentiously, a rise in savings, including among people on lower incomes.

John Hemming (Liberal Democrat, Birmingham, Yardley)

I thank the shadow Minister for giving way again; he is being very generous with his time. The Royal College of Midwives has argued that if a family on low income have money available, they should spend it on improving their health. Does he disagree with that?

David Hanson (Labour, Delyn)

Again, the hon. Gentleman is giving an and/or solution. There is a potential argument for people spending their money on day-to-day living, but, equally, the child trust fund, as he will know, is not something to which individuals have to contribute. The Government have been contributing to encourage savings, and people can, if they have resources in their pocket, put some in for their children. Some do, and some do not. They can also put nothing in at all and leave that initial Government contribution to mature when the child reaches 18. They can opt in or opt out at different times in their financial cycle. It is a matter of choice. Individuals can choose when to put money into their children’s futures. What is uncontroversial from today’s discussions is that the scheme generates greater saving across the board than there had been before it came into effect.

Yvonne Fovargue (Labour, Makerfield)

Does my right hon. Friend agree that in Tuesday afternoon’s evidence session, people who were not providers, such as 4Children and Scope, agreed that it was absolutely too soon to abolish the scheme? This group of amendments relate to that.

David Hanson (Labour, Delyn)

Indeed. The scheme has been operational for a relatively small number of years. The children who have child trust funds are relatively young because of when the scheme commenced. I should perhaps have declared an interest, Mr Howarth, because I have four children, three of whom are older, but the fourth is aged 7 and is in receipt of a child trust fund—I had them all with the same wife, but that is another story. The key point is that there are individuals who have generated savings that would not have been made before the child trust fund came into place. There are people on lower incomes who are saving whatever they can, whenever they can. That money is not lost to society; it is put away for the 18th year, when matriculation takes place.

Claire Perry (Conservative, Devizes)

I agree with the right hon. Gentleman; we have heard a lot of evidence stating that people do save into the scheme. We can debate statistics relating to how much poor families save, but the point that has not been proved at all is whether additional savings are being made. I have heard no evidence that there is any additionality in the savings numbers, or that such savings would not have otherwise been made. We took evidence from a variety of experienced witnesses, but there are numerous comments on the Netmums website, for example, in which people have asked what was wrong with saving into a bank account. People have commented that they would be saving anyway and that the child trust fund was nice to have, but not essential. Has the right hon. Gentleman seen any evidence that it has generated any additional savings, particularly among the most disadvantaged groups? If so, would he be prepared to put that before the Committee?

David Hanson (Labour, Delyn)

I am grateful for the hon. Lady’s comments. I have already said that empirical evidence suggests that savings have risen, in the cohort, from 18 to 31% over the period. There is no definitive evidence as yet as regards the breakdown between the poor and more affluent members of society, but there are certainly poorer people who are saving, who were not saving before. That is an advantage for the scheme as a whole.

At the moment, for example, some £2 billion in assets is under control of the scheme, and £22 million a month in regular contributions is going into child trust fund accounts. We could argue all day about whether that has moved from building societies, from banks or from shares to child trust funds, but everybody who has given evidence to the Committee has said that there has been success in raising the level of savings into child trust funds, and that that has had a material benefit in encouraging people, particularly those on the poorest incomes, to consider saving, when they can afford to, for their children’s future.

On amendment 26, I want to ask about the implementation date of the scheme. It is quite clear from what we heard during the evidence sessions that nobody, including the Minister, expects the replacement scheme to be in place by 4 January 2011. In a press release issued on 26 October 2010—for the sake of accuracy, at 17.55—the Minister stated:

“The Government will now work closely with stakeholders to finalise the structure of the accounts, and intends for the new accounts to be available by autumn 2011.”

One of the key issues on which the Minister needs to reflect is the speed of the abolition of the child trust fund and the replacement product that he is putting in place in 2011. Amendment 26 would not stop the Minister abolishing the child trust fund or eligibility for the child trust fund, nor would it close down the scheme. It would not stop the Minister establishing the new scheme in autumn 2011. It would simply allow him to continue the child trust fund scheme between 3 January 2011 and whatever date he chooses to introduce the new scheme proposed in the press release.

John Hemming (Liberal Democrat, Birmingham, Yardley)

At some stage, it would be nice to clarify the right hon. Gentleman’s figures of 18% and 31%. On the point that I intervened on about delaying the abolition of the scheme, I refer him to column 58 of the Hansard report of the Committee’s proceedings on Tuesday 2 November; sadly, I was unable to attend. Marc Bush, who spoke on behalf of Scope, referred to his concern that people were losing benefits as a consequence of saving money in the child trust fund. Does the right hon. Gentleman agree that that is a bad situation? Is it not sensible to take a break and sort matters out, so that such situations do not occur?

David Hanson (Labour, Delyn)

I do not accept that a break would be helpful. If we are trading contents of Committees, I trade with him column 27 of the Committee Hansard from 2 November. In response to my question, Mr Shaw said:

“Therefore the investment in setting up a new product would in effect be like starting from scratch. There is no legacy that you can continue.”

He also said:

“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 completely different animal to an ISA.”––[Official Report, Savings Account and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 27, Q69.]

The amendment is designed not to tell the Minister not to abolish the fund—although I hope that he does not—but to encourage him to have his alternative in place before the child trust fund is abolished, with the nuts and bolts thought through. It is designed to encourage him to present that alternative with clarity. What is the rush?

Sarah Newton (Conservative, Truro and Falmouth)

We also heard considerable evidence that over 100 products are available to parents or grandparents who want a tax-free saving scheme for children. The right hon. Gentleman’s hypothesis that nothing will be available for parents who want to save for the future simply is not true. We heard from the Institute for Public Policy Research this afternoon that the most trusted financial services brand for the over-40s on low incomes is the Post Office. For the under-40s, the most trusted brands are supermarkets. All those organisations have well known tax-free savings products.

David Hanson (Labour, Delyn)

I am grateful to the hon. Lady for her comments, but I believe that she misses the point of the child trust fund. There is still a Government contribution, albeit a reduced one, to help kick-start that fund. The scheme will be abolished on 3 January 2010, and no definitive scheme will emerge until perhaps autumn 2010. The Minister has said that those who want to participate in that scheme will be able to backdate contributions accordingly; that is fair enough. I am simply asking: why have that hiatus? Why have that gap?

The Minister could accept the amendment or, if it is flawed or not strictly correct—I have been a Minister and I accept that sometimes amendments do not work out exactly, and parliamentary counsel might need to look at the issue—he could come back on Report with a thoroughly thought-out measure that allows the abolition of child trust fund contributions, eligibility and mechanisms to occur on the date on which the new scheme comes into play. What is the rush? The cost will be relatively minimal because contributions are lower than they were when the Labour Government were in power, due to an order passed earlier this year. Contributions are minimal. On a point of principle, why not let the two schemes run into one?

On Tuesday, Carl Emmerson of the Institute for Fiscal Studies mentioned an “extremely short consultation period.” He said:

“I do not think that it is possible to make decisions on how the policy should look and also ensure that the financial sector is geared up to operate a market of that size.”

That is a quote from him, in the evidence session, in response to the idea of the Minister introducing a new ISA scheme in October or November next year. He also said:

“One option, which was what I thought the Government were going to do back in June, would simply be to abolish the Government contribution to the child trust fund but still allow families to open a child trust fund with tax-free saving tied up to age 18, as they currently do. You would be abolishing the contribution, not the actual accounts.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 16, Q37-38.]

The amendment would give the Minister time to think about that.

What is the justification for abolishing the child trust fund when a parent whose child is born on 4 July next year, for example, could make a donation of £50 of their own? That involves no Government contribution or taxpayer funding, but it does involve a child trust fund account. The mechanism is there because, as the Minister has recognised, those of us who currently have children who qualify for the child trust fund will still have that resource tied up, and the computer system and reference numbers will be in place until those children matriculate at the age of 18.

Why not continue with non-Government contribution to the child trust fund, rather than establish a whole new product to deal with the issue—a product that will not, in my view, help the poorer members of our society to save? A tax-free ISA is not important to them, but the contribution of the child trust fund was.

John Hemming (Liberal Democrat, Birmingham, Yardley)

My reading of the Bill is that children born before 3 July would be entitled to the provision, as long as an application is made within the next three months. Accounts are still going to be opened. However, there is no massive urgency for the replacement. Children will continue to be born, and they can apply retrospectively for a new account. If people are losing benefits as a result of the fund, the previous Government clearly made major mistakes in its implementation.

Sheila Gilmore (Labour, Edinburgh East)

I have read the section to which the hon. Gentleman refers—perhaps he was not actually present and did not hear what was said. Mr Bush stated:

“child trust funds, particularly for disabled children, work so well because there are no alternative savings products that work for families with disabled children, mainly because of the penalties that are inbuilt within the benefits system.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 58, Q161.]

He then went on to say that people were afraid—wrongly, I think—that some officials misinterpreted the child trust funds as affecting benefits. Is not the solution to ensure, perhaps with a minor amendment, that for disabled children, child trust funds would not interfere with benefits? It may well be that they do not, and that that was only a fear. Mr Bush’s evidence suggested that child trust funds were actually the best form of investment.

Sarah Newton (Conservative, Truro and Falmouth)

Will the right hon. Gentleman give way?

George Howarth (Labour, Knowsley)

Order. Before the hon. Lady intervenes, I should say that, in the short time we have been meeting, I have noticed that interventions have been getting longer and longer. There is nothing wrong with interventions. It is a good way of debating these matters, but members of the Committee should be aware that interventions should comprise a single point and a single question.

Sarah Newton (Conservative, Truro and Falmouth)

Thank you for that reminder, Mr Howarth. Does the right hon. Gentleman also recall that the IFS said that by far and away the most tax-effective way for parents to save would be with ISAs?

David Hanson (Labour, Delyn)

That is all very well for those parents who pay tax. Not every parent pays tax. The hon. Lady needs to reflect on the fact that the child trust fund was a universal benefit whereby a sum of money, admittedly now lower, would be paid in to help kick-start the investment.

Yvonne Fovargue (Labour, Makerfield)

On Tuesday, Anne Longfield said that the language of ISAs is confusing, does not relate to the experience of most low-income families and should be kept as simple as possible, which the child trust fund is.

David Hanson (Labour, Delyn)

Indeed. I accept what my hon. Friend says. The key point, and this is genuinely trying to be helpful to the Minister as I am not one to cause him grief—

Mark Hoban (Conservative, Fareham)

The right hon. Gentleman certainly has not so far.

David Hanson (Labour, Delyn)

Well, it is not for me to cause him grief, but for the people who lose the benefit in due course and who will react against the policy. What is wrong with just making sure that we continue to run the existing child trust fund mechanism beyond 3 January 2011, and he can then, by order, end that scheme on a date when the scheme that he is bringing forward is in place? I cannot see the difficulty there. The Minister may be able to help me again today. In his press release of 22 October he said:

“Annual contributions will be capped”.

Has he made a decision on what that cap will be yet? He has not responded and I will certainly give way to him if he has made a decision on that.

Mark Hoban (Conservative, Fareham)

I know that the previous Government had their own way of making policy, but we are consulting and it would be wrong to pre-empt that consultation by deciding what the cap is now. I am sure that the right hon. Gentleman would agree that good policy making is based on consultation. I may be diverging from past practice but we want to consult with providers and stakeholders about the level of the cap.

David Hanson (Labour, Delyn)

Perhaps the Minister could tell me exactly how much consultation he had on the abolition of the child trust fund because I do not think there was a great deal of consultation on that. Today is 4 November. Clause 1 abolishes the child trust fund contributions eligibility from 3 January 2011 without the Minister yet being able to tell us what will replace it in any shape or form. I refer again to Mr Shaw who said:

“An ISA is run on an annual renewal basis, whereas a child trust fund is run as a trust for the child over a much longer period.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 27, Q69.]

There are differences in the product. The Minister will not confirm, because he is still consulting, what product will replace the child trust fund while asking the Committee 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 Minister is going to abolish it, he should do so from the date when the new scheme comes into operation. That would avoid all the confusion of two schemes being run at once and people not knowing what the final scheme is. It avoids the problem of backdating contributions from the commencement of the new scheme to 3 January 2011. I cannot understand why the Minister will not reflect on that. I am throwing him a ball to help him achieve his objective of abolishing the child trust fund, even though we oppose that abolition.

Kate Green (Labour, Stretford and Urmston)

It is interesting that Tony Vine-Lott told us on Tuesday that one of the features that had been attractive to providers who had significantly entered the child trust fund market was the Government contribution. Is it not the case, therefore, that the Minister ought to be clear about how providers would respond to a product that might or might not have a Government contribution? Until that is known, he cannot proclaim the likely commercial success of the junior ISA.

David Hanson (Labour, Delyn)

My hon. Friend makes a valuable point. I will provide the Minister with some statistics behind the figures. Currently, about 70,000 children are born every month. If the scheme is abolished on 3 January 2011, it means that in January, February, March, April, May, June, July, August, September, possibly even October and November, approximately 70,000 children will be born each month who are not eligible for the child trust fund. They will have to learn from their parents, retrospectively, about the new product, even though their parents may have different levels of educational attainment and different information sources. They will have to learn from the Government, retrospectively, about how they then put money into the fund under the Minister’s new ISA proposals. They may have not realised that they can put money aside before those periods of 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 up the child ISA, because we do not yet know what the child ISA is.

The amendment simply gives the Minister a chance to say, “On 1 October, this contribution”—much as I do not want it to happen—“will end, and the new scheme will come into place on 1 October.” I will even give him a commitment that I will not oppose the regulation’s passage through the House next June or July, so that he can agree to the date of 1 October and end the hiatus. What is the problem with that? I am compromising dramatically my beliefs and those of my hon. Friends in offering the Minister that opportunity, because it will ensure that children born from 3 January through to whatever date he issues his ISA will have a child trust fund contribution of £50. They will be able to establish that and maintain the continuity that, sadly, the Minister wishes to throw up in the air and lose. I cannot see the argument against that.

John Hemming (Liberal Democrat, Birmingham, Yardley)

May I put an argument against that?

David Hanson (Labour, Delyn)

How can I resist?

John Hemming (Liberal Democrat, Birmingham, Yardley)

If a person has an account of £500, it earns £7.50 at an annual rate of 1.5%. If they have only £50, it is 75p, which most providers would run at a loss, and I am not sure that providers would financially be able to cope with that.

David Hanson (Labour, Delyn)

I hate to disillusion the hon. Gentleman, but most providers are losing potential future clients now. They will find great difficulty in maintaining the existing infrastructure for the child trust fund from now to commencement. When we get to the clause stand part debate, I want the Minister to talk about how the abolition of the fund will impact on the current providers of child trust funds. They provided the fund in good faith, in line with Government policy. The Minister has given a commitment to maintain the child trust fund for people who paid into it, so that they can matriculate at the age of 18.

Stephen Williams (Liberal Democrat, Bristol West)

The right hon. Gentleman may recall the evidence session with Tony Vine-Lott from the Tax Incentivised Savings Association. I asked him to confirm that, for the remainder of the child trust fund’s life—because, of course, the existing funds have not been abolished—they would still be charging annual fees. Although none of the witnesses said yes, they all nodded.

David Hanson (Labour, Delyn)

There has to be an element of financing for the operation of the scheme. That is understood. That has to be the case. By my estimates—I may be a few hundred thousand pounds out either side—we are talking about a possible cost of around £31.5 million until October, plus the costs of maintaining the existing child trust fund. In deficit reduction terms, that is not a great deal of money. It would ensure that the hiatus did not happen and the Minister could introduce his scheme at the right time without damaging the child trust fund from 3 January. It would ensure that another 500,000 children had some contribution towards their child trust fund, and that many people, as mentioned by the hon. Member for Truro and Falmouth, could contribute to the fund over that period of time. I hope that the Minister will reflect on that.

Amendment 1 states that we should leave out 3 January 2011 and insert 3 January 2014. Again, the Minister will know, because Government Members have indicated it, that the next general election will be in 2015. It is quite possible for him, therefore, to accept the amendment; to examine the continuance of the child trust fund with lower contributions of around £31 million or £32 million a year—£50 for each person; to encourage that savings culture over the next three years, and to consider how the economy develops in that period.

The Minister wants—and believes that they will—the general deficit reduction measures, employment measures and reductions in public spending to benefit the economy as a whole. We think that those measures might cause 500,000 jobs to be lost in the public and private sectors, but he presumably believes that the economy will get better because of the medicine that the Government are giving it over the next three years.

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? The amendment gives him the opportunity to abolish the higher rate and would allow for a contribution rate over the next three years of £50 per child for the 70,000 children who are born each month. That would save a considerable amount of public resource, which is important, as the hon. Members for Congleton, for West Worcestershire, and for Devizes mentioned. He would save a considerable resource without abolishing the scheme. If, therefore, the economy picked up, he could either maintain the scheme beyond 2014, or consider returning to a higher rate of contribution to help alleviate poverty, and help asset-poor individuals at the age of 18. The scheme could be maintained for a three-year period.

I accept that the proposal involves a cost of £31.5 million to £32 million a year. However, over the three-year period, that might be £100 million or £120 million, 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 it—a considerable amount of public resource, but still give him the flexibility to ensure that we have the benefits of the savings culture about which we heard in the evidence sessions. It would ensure that the mechanism and infrastructure are still in place so that we can continue to contribute. If the economy picks up—and we will fight an election on that in four years’ time—

Mark Hoban (Conservative, Fareham)

Five years.

David Hanson (Labour, Delyn)

Four and a half now. If it picks up, the Minister can reflect on the abolition of the child trust fund. If he does not accept the amendment, I will presume—and far be it from me to presume, because the Minister can speak for himself—that he is against the fund on the basis of dogma, not of deficit. He is against the fund because it is a Government contribution to help partnership with parents to secure assets for people who are asset poor at the age of 18 and will remain so unless he does something about it. If it is not dogma, he can save a large amount of public money by accepting the lower rate, running it for three years until 2014, and maintaining the infrastructure of the scheme.

If the Minister did that, he would not have to start his new ISA. He could stop developing that, stop the hiatus with the new product, and maintain the existing child trust fund at a lower rate of contribution. The Government would not have to go through the mechanisms of Treasury officials developing a new ISA, talking to the market, throwing all the cards in the air and seeing how they land. He could maintain the current product for a much lower rate without abolishing the trust fund.

I have moved a long way on that, from opposing the reduction of the £250 contribution in July to saying to the Minister, “Here is an offer from the Opposition—have the £50 rate, maintain the scheme, run it for three years, see how the economy picks up and, at the end of the three years, if the economy is still going belly up, abolish it.”

Fiona Bruce (Conservative, Congleton)

Would a £50 contribution not produce the worst of all worlds for young people? The Labour party has said that the one benefit for young people whose families do not engage with the scheme is that they at least have a nest egg at age 18. That contribution would not provide that.

David Hanson (Labour, Delyn)

If the hon. Lady votes for clause 1, there will be no nest egg at the age of 18 for contributions to be paid into; there will be a nest egg only for those people who can afford to put money into a tax-free ISA. Fifty pounds is not perfect—I do not want £50, and it is not what the Labour Government did—but it is £50 more than the hon. Lady will be voting for if she supports the clause in due course.

Kate Green (Labour, Stretford and Urmston)

Is it not also the case that, by keeping in place a mechanism that allows for Government contributions, we could reactivate the mechanism to make a second payment at age seven? After the economy recovers, we might have the opportunity to resume the previous scheme.

David Hanson (Labour, Delyn)

Indeed. By amending it to 2014, I am giving the Government an opportunity to reflect on the fact that they do not have to abolish the scheme to save money. The Minister could take a payment holiday for that three-year period. I do not necessarily think that that is a great idea, but he could do that. He could maintain the structure of the child trust fund and wait to see how the economy develops. What is wrong with that? What is the problem with taking a payment holiday and having a reduced figure while maintaining the structure of the child trust fund? Or does the Minister not believe in the concept of a child trust fund? If that is the case, he should tell us so. If the Bill is about deficit reduction, I am offering him £350 million to £400 million of deficit reduction by maintaining the scheme for the next three years.

Kerry McCarthy (Labour, Bristol East)

Is it not also the case that, if the child trust fund’s structure were maintained, as the economy recovers, and as the deficit is reduced, Government 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 across the board.

David Hanson (Labour, Delyn)

My hon. Friend makes a valuable point. I do not want to discuss it now, but we will table amendments concerning looked-after and disabled children. We will also table amendments concerning the poorest children in society.

I remind the Minister, because we will be moving on to it in a moment, that the Conservative manifesto, on which eight members of this Committee stood, stated that they would maintain child trust fund payments to those in receipt of disability living allowance and maintain payments for the poorest third of society. The Minister could take a three-year payment holiday in payments to those groups, then look at the economy, and still go back to the electorate in 2015 and say that he had maintained payments to the poorest third and to those in receipt of disability living allowance. He would have to admit that he took a payment holiday, because he had difficulties with finances, but he could say that he had restored the payments. If the mechanism is not in place, the Minister will not be able to do that, because he would have put in place a totally different product with a hiatus in between in which he would have reneged on his manifesto commitments. He would not have achieved what hon. Members—and they are honourable Members—wish to do to meet the manifesto commitments that got them into Government.

Stephen Williams (Liberal Democrat, Bristol West)

The right hon. Gentleman seems to be going back to points that he raised earlier in our considerations. He raised them on Second Reading, too. Perhaps the Labour party’s preferred alternative is now to focus this fund on poor and disadvantaged children, or children with special educational needs and disabilities. Does he acknowledge that by the next general election £2.5 billion a year will be spent on precisely those groups in the form of the pupil premium?

David Hanson (Labour, Delyn)

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 my hon. Friend the Member for West Ham feels particularly strongly about how it would affect her constituency.

I remind the hon. Gentleman that he has a clear position of integrity, and he is supported by his electorate. He opposes the child trust fund and he said that he did in Bristol West. The hon. Member for Birmingham, Yardley also went to his constituency and said that he opposed it. They are fulfilling their obligation in this Committee. I say to every other member of the Committee, however, that they will not fulfil their manifesto obligations. Potentially, if I am honest, we are not now going to meet our obligations either, because we might even give ground to save—[Hon. Members: “Ah!”] We are giving ground to salvage the potential for the child trust fund.

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 keep the child trust fund in place by looking either at a payment holiday, or at alternatives to the child trust fund over that period of time.

The rest of the debate is in Hansard.