Savings Accounts and Health in Pregnancy Grant Bill

My Lords, this has been a very powerful debate, with some excellent, if not brilliant, contributions, but I express again disappointment that the designation of this Bill as a money Bill precludes us a proper Committee stage. Indeed this issue has clearly exercised a number of speakers this afternoon. To the noble Baroness, Lady Howe, who was obviously unable to support us on the Motion last week, I say that that was not a challenge to the certification by the Speaker; it was simply to get a Committee stage within the existing rules. The noble Baroness, Lady Noakes, is right; we do not and cannot challenge the certification by the Speaker, although if I had the benefit of the incisive research, as ever, of my noble friend Lady Hollis, I might have been a little bolder. My noble friend Lord Griffiths raised an interesting point about whether this certification was pressed on the Speaker by the Government; it was a new point to me, but something which we ought to understand. Certification comes at the end of the House of Commons process, but that is not to say that somebody might be preparing the arguments for, and be privy to, the prospect of that certification in due course. I think that that is a specific issue that we need to understand in relation to this Bill. If nothing else comes from the debate we have had around this issue, I hope that it will bring a process of some greater clarity to when a money Bill is a money Bill and some greater clarity on the process and timing of that. Notwithstanding that, my noble friend Lady Hughes urged the Minister not to stand behind that certification and to bring forward legislation which clearly has strong support right around the House. As we heard from the Minister, the Bill implements the second stage of cancelling government contributions to child trust funds, withdraws funding for the health in pregnancy grant and repeals the prospect of rolling out saving gateway accounts, which have been the subject of successful pilots. Each of these measures has resource implications, of course, but they have profound policy implications as well. But given the Government’s focus on deficit reduction, any consideration of the Bill is inextricably linked to consideration of their approach to tackling the deficit, an approach we consider to be flawed. We have heard the usual party line from the Minister about the deficit, but no objective analysis of our economic position. Over the past two years, the UK has faced the biggest economic challenge for generations as the global financial crisis hit our banks here and our export markets around the world. At the start of the crisis, the UK had the second lowest debt in the G7, below that which we inherited from the Conservative Government in 1997. Borrowing rose not because of our spending before 2007, but because tax receipts fell and spending was allowed to rise to provide extra support for the economy when it was at its weakest. The fiscal stimulus co-ordinated with the rest of the world, with only the Conservatives in the UK a lone voice in opposing it. The consequences of that—an increasing deficit and an increase in public sector debt—would have to be dealt with by any Government and tough choices would be necessary, but we consider that the coalition Government have made the wrong choices. We reject the Osborne prescription which says the faster, the harder and the earlier you cut, the better for our economy. Indeed, is that not the advice that Ireland was given? We argue for an approach that would bring the deficit down, but in a balanced way that gives the private sector a more realistic chance of taking up the slack. Indeed, last week’s OBR forecast shows lower growth than expected over the next two years, a relatively slow recovery from recession by historical standards, and that the scale of the fiscal consolidation, yet to have its full effect on the economy, has weakened the prospects for growth. So there is an alternative approach, and there are different choices about how the fiscal consolidation should be borne. But by locking into an imprudent consolidation plan, the Government have restricted policy choices and made a joke of the Chancellor’s declaration that he will not balance the budget off the backs of the poor. That is precisely what is happening in this Bill. There are consequences that arise from the deficit reduction plan, as my noble friend Lady Hughes pointed out. The noble Lord, Lord Northbourne, rightly challenged us not to accept that poor outcomes for some children do not matter. Of course, it is the pattern of what has gone before. We know that the combined effects of the June emergency Budget and the comprehensive spending review are deeply regressive, and what is fair about measures that have cut almost £7 billion from direct support for children and where women are hit twice as hard as men by changes to tax credits and benefits? My noble friend Lady Armstrong pressed on this, although I think it is right to say that the Conservatives were not originally in support of our action on Northern Rock. My noble friend Lady Thornton made it clear that there can be little doubt that child trust funds have been a success in terms of encouraging people to save. Evidence submitted in another place showed that there was a 72 per cent take-up of the scheme by parents, with obviously all children being enrolled after 12 months. Some 31 per cent of accounts were being topped up, rather than the 24 per cent suggested. This was across the board, although regularity and amounts varied. Evidence provided in another place variously described child trust funds as the, "““single most successful savings policy to date””," or a, "““very successful nudge for people with regard to the inertia over savings””." It is like auto-enrolment for pensions, as my noble friend Lady Drake argued. Depending on the rates of return, it was suggested that accounts could accumulate to as much as £9,000 or £10,000 by the age of 18. There are obvious benefits of the child trust fund in helping to develop and reinforce a savings culture, encouraging asset accumulation, seeing the benefits of young people having a tangible stake in society, having to make choices, hopefully responsible choices, about resources, and becoming more financially literate. These are opportunities that many young people from better off families have at the moment. Child trust funds opened up these prospects for children from poorer families, and they are now to be denied. There are a number of options the Government could pursue to retain the prospect of some of the benefits of the child trust funds—certainly the prospect of concentrating the saving instrument on the poorest one-third of families, those on DLA and looked-after children, which was a commitment of the noble Lord’s party at the last election. What has happened to this pledge and what would it cost now to fulfil it? They could reduce the government contribution for a period or defer the abolition for a period, but they have chosen to stop these arrangements entirely. That is to be regretted. We acknowledge, though, that the national financial advice service, with its limitations, as my noble friend pointed out, and the annual financial health check will help build financial literacy and is to be welcomed. We are told that this service is to be rolled-out next spring. Given its proximity, perhaps the Minister will tell us a little more about its scope and reach and the nature of the levy on the financial services sector, which is to provide the financing. It has been announced—we heard it again today from the Minister—that the Government are to introduce a junior ISA, but that some of the detail is still unknown, as, indeed, is its final timing. Clearly such a savings product would not benefit from a government initial or interim contribution but would obtain the benefit of a tax-free build up and would be, presumably, tax free on exit. The benefit of the tax-free build up would, presumably, effectively accrue to contributors, whose income would be sheltered. In comparison to the child trust fund, this would be less advantageous to those families on the lowest income, who are not wholly within the charge for tax, and who would miss out on the extra government contribution—the poor missing out again, with higher rate taxpayers benefiting most. So much for Conservative and Lib Dem values. Evidence given to the Public Bill Committee in another place suggested that providers of child trust funds would need time to get their systems, including distribution systems, in place for the new product—unless, that is, the junior ISA is the CTF without the government contribution. Given this seemingly inevitable gap between the proposed demise of the child trust funds and the introduction of junior ISAs, could there not be some process to bridge the gap by extending the child trust funds or backdating junior ISA arrangements? What attention are the Government giving to the practical implications of introducing a new product? What reassurance can be given to those who, according to Save Child Savings have invested millions of pounds in the systems, infrastructure and marketing required to ensure consumers have access to a vibrant competitor provider community? What assessment has been undertaken concerning the likely take up of junior ISAs—the cost does not appear in the Red Book, so far as I can tell—and the distributional affect of the benefits? Nearly every noble Lord who has spoken has focused on the issue of looked-after children, including my noble friends Lady Thornton, Lady Armstrong, Lady Blood and Lord Griffiths of Burry Port; the noble Baronesses, Lady Howe, Lady Noakes and Lady Ritchie; and the noble Earl, Lord Listowel, who has always strongly supported the cause of looked-after children. It has been rightly the subject of debate both today and in another place, but we should acknowledge that, despite progress, we do not have a strong record on providing good outcomes for looked-after children, who enter adult life poorly provided for. As Barnardo’s and Action for Children state, the transition from care to independence is a critical period for young people and having adequate financial support is a key factor if they are to succeed as they enter adulthood. Child trust funds would have been one way of helping to rectify the problem. The proposed replacement by a junior ISA, which is presumably predicated on parental contributions, does not help without special arrangements. The budgets of local authorities, who are the corporate parents of looked-after children, have been particularly savaged by the CSR, as my noble friend Lady Armstrong explained. We aware of the discussions that have taken place with Mark Hoban, Paul Goggins MP. Barnardo’s and Action for Children, and warm words have, indeed, been spoken. What specific proposal is coming forward from the Government? We cannot pass an amendment today, but we hope in the circumstances that the Government can give us the clearest commitment, on the record, to bring forward legislation on this matter. The Bill before us repeals the primary legislation for the savings gateway, which was to be a tax-free cash saving account available to people in receipt of qualifying social security or tax credit awards. The purpose of this was clear: to promote a saving habit among those of working age on low incomes by way of a government contribution for each pound saved. It was acknowledged by the Minister that the evidence from the pilot studies showed that matching was a popular and easily understood incentive to save. Given that the first accounts were due to be opened in July this year and that the government contribution were to come after two years, no cost would have arisen until 2012-13. It cannot be argued that this was not a targeted programme. Its scrapping will only disadvantage the poor. Why repeal the primary legislation? If the Government insist that the gateway is unaffordable but they recognise its merit, why not defer for a period? The noble Baroness, Lady Noakes, hinted at support for some arrangement to incentivise saving for low-income families. There is another dimension to this. How does the Minister respond to the submission from the Runnymede Trust that the withdrawal of the savings gateway would disadvantage BME communities in particular, who tend to have lower levels of savings? What detailed assessment of the equality implications of the proposals has been undertaken? I noted that the noble Lord, Lord Northbourne, expressed incredulity at the Government’s claim that the Bill has little impact on equality. My noble friend Lady Thornton spoke of the health in pregnancy grant with knowledge and passion, as did others. The evidence presented to the Public Bill Committee in another place set out the benefits of the grant and its potential to improve a mother’s diet during pregnancy, as well as providing the wherewithal to help with necessary purchases of equipment. Indeed, the evidence described how the onset of motherhood is a defining moment in a parent’s life but how it can also be a step towards poverty. It is a time when the support of services and financial means should be sustained and not withdrawn. There may be issues about the timing of the grant, and whether earlier payments would be more appropriate, but withdrawal of this support at the same time as families are facing an array of other cuts is unacceptable and flies in the face of the Government’s expressed objectives of reducing inequalities and improving social mobility and outcomes for children. The Minister spoke about the benefit of voucher system. I wonder quite how that sits with issues of individual responsibility. As was pointed out, it is not just universal but means-tested benefits which are being attacked. The Sure Start maternity grant for other than the first child is to go. Yesterday’s announcement that Social Fund budgeting loans will be available to help families to buy maternity items will be of little comfort. What additional resources are being made available to the Social Fund for this? Our opposition to the Bill is on two levels. It is set in the concrete of a deficit reduction approach which drives conflicts with stated government policy around fairness, social mobility and better outcomes for children. Even within the practical confines of these constraints, it fails to take opportunities to retain and build on that which the Government have acknowledged to be worth while. All in all, it is another measure which will hit the poor the most.