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13 Jan 2009 : Column 7WH—continued

Mr. Allen: If it is anybody’s fault—I do not think that ascribing fault is helpful—it is the fault of policy makers, so we need to look to ourselves and what we do. That takes me back to the last point made by my hon. Friend the Member for Stafford (Mr. Kidney). Local resources are available, and some of the numbers involved are quite small: there were 500 teenage parents last year in my city, and the number of people in key groups who need specific help might be in the dozens or as much as 50 or whatever. If the figures are broken down and dealt with effectively at a local level, we are not looking at an impossible tsunami of millions. However, as well as those resources needing to be deployed properly, as my right hon. Friend the Member for North-West Durham pointed out, we need strategy. One of her breakthroughs when in the Government—she has now had to leave the debate—and one of the breakthroughs that my right hon. Friend the Member for Chingford and Woodford Green should also claim credit for, although within his own context, was that they brought strategic thinking to the subject. Should not Governments and Parliaments really be concerned with knowing what needs to be
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done across a generation, as well as with deploying resources here and there? Often those resources can be deployed far more sensitively by more free and independent local government and other vehicles.

Mr. Frank Field: May I make a plea that we are pushing at an open door? When I ask children and young people in Birkenhead and Manchester what they would most want from their school if they had a school contract, every one of them said that, within their first four priorities, they wanted to be helped to be good parents. The stunning facts that my hon. Friend has just given about the first three years of life would not only make the basis of some pretty good teaching and learning in schools, but start to give young people guidelines on their responsibilities for that intensive care over those first three years. No one now tells them what those responsibilities are, so why should they know?

Mr. Allen: There are so many brilliant concepts and philosophies relating to this area, including the sort to which my right hon. Friend has just alluded, and we need to liberate people’s capacity to implement them. I hope that that point will draw me back to not only the concept of early intervention, over which I have laboured in several Adjournment debates, but specifically its financing, because that is the guts of the debate. In looking at ways of drawing in finance to make early intervention work, I would like to make it as easy to invest in the human capital of healthy and happy young children as to invest in the physical capital of land, buildings and machinery, the intellectual capital of ideas, inventions and artistic creations and the financial capital of company shares and bonds.

The current economic downturn has been a signal for radical rethinking on borrowing and spending, and that needs to extend beyond what was done in the 1930s to what we need to do for the 2030s and the generation now growing up who will be adults a century after the great depression. Today’s borrowing must be tomorrow’s springboard for success, not a ball and chain or something that gives no returns in the future. The investment must give those returns massively and in ever greater amounts, create growing dividends and savings for a generation and help to repay current borrowing—something that must be done in the future.

Sadly, the case of Baby P has backed up the claim made in a recent publication in The Lancet suggesting that one in 10 children suffer abuse, and my view is that they are just the extreme tip of the iceberg. The bulk of the children to whom I am referring are those who, to put it more mundanely and less dramatically, would benefit from effective parenting, which can be created by early intervention. If children grow up healthy and happy in households that offer them love, nurture, stimulus and empathy, their prospects improve dramatically for the rest of their lives. They are less likely to commit antisocial behaviour and crime or to become dependent on alcohol or other drugs. They are more likely to achieve at school and less likely to stress their teachers and disrupt the education of others. They are more likely to secure well-paid employment and become taxpayers and less likely to be dependent on welfare. They are less likely to have unwanted pregnancies and more likely to become great parents of children whom they will also wish to raise to be good parents in their turn.

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Taken together, all those effects suggest that successful early intervention policies will generate an exceptional financial payback, which could be seen as a bonus. I do this sort of work because I care about the kids in my constituency, but by the way, it will make the Government billions of pounds if done properly over the long term. To use a fashionable Keynesian expression, early intervention is a massive multiplier. That sort of common-sense economic and financial conclusion has now been underpinned by fantastic amounts of research. Five or 10 years ago, we might have been scratching around for an evidence base to prove it, but we now have a lot of solid evidence, not least because of the superb work done by Treasury officials in the lead up to the last comprehensive spending review.

There is also the work of James Heckman, the 2005 Nobel prize winner, who demonstrated that the economic payback of pre-school intervention was three to six times higher than that of post-school intervention. When I talk to people about that and try to search for the right words, I often refer back to my mum, who said that a stitch in time saves nine—it does not need to be a highly scientific explanation. We all know that helping a child early will save ourselves a lot of grief and expense later on.

Even last week, I discovered that a tremendous evidence base is being built in Birmingham, not least because of the inspiration of Steve Aos, who has done many calculations about returns using a very conservative methodology that gives the lowest possible return in all cases. Birmingham is now using some of that evidence and has a £41 million package that is intended to save £102 million, but I need to examine that a little further.

One thing that I do know about is the nurse-family partnership, because we brought it to Nottingham and, as I mentioned earlier, are using it with single teenage mums. It is a home visiting programme for low-income mothers with their first babies. The programme is now 26 years old. Professor David Olds, who started it in the United States, has an evidence base of 26 years—try contradicting that. It was based on extremely rigorous and deeply conservative, rather than speculative, assumptions. He has demonstrated, and independent scrutiny has supported, that under the programme mothers were significantly less likely to abuse or neglect their children or to have subsequent unintended pregnancies or misuse alcohol or drugs. They were significantly more likely—percentages are attached to these claims—to enter stable employment and escape welfare benefits.

Unsurprisingly, the programme has also demonstrated enduring benefits for the children. Compared with their control group counterparts who did not have intensive nursing and health-visiting support, those who did made 56 per cent. fewer visits to hospital emergency rooms, so child abuse and accidental injuries were reduced. As adolescents, the children who had been through the nurse-family partnership were arrested 56 per cent. less frequently than their other cohort counterparts and had 81 per cent. fewer convictions. As 15-year-olds, they had had 63 per cent. fewer sexual partners. There is a wealth of evidence, which I know the Minister has seen, to support those statements.

Clearly, appropriate intervention saves lots of money. The Treasury recognised that in the run-up to the last comprehensive spending review, as well as acting on it, which I welcome warmly, in a number of areas. For
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example, the Treasury supported Every Child a Reader, which gives one-to-one attention to young disadvantaged children struggling with reading and writing. The CSR backed the scheme, saying that raising children with poor education to the average would save £6 billion in public expenditure to deal with the consequences of poor literacy.

As my right hon. Friend the Member for Birkenhead said, we are pushing at what I hope is an open door at the Treasury, and we have one foot through that door. The only thing that I want from my right hon. Friend the Minister as a result of this debate is for that work to be taken further. I would like to discuss more informally with him, and perhaps with colleagues who are present today, how it can be taken forward along with the Treasury’s work. I do not want a cheque tied in a pink ribbon or a commitment that this or that financial instrument will be used in future, but I do hope that the Minister will entertain a continuing dialogue over the next year with colleagues of good will from all parties.

My experience from chairing the local strategic partnership in Nottingham, which pioneered the package, is that it is dangerous to seek short-term funding, funny money, two-year grant aid and the like. It is disruptive, the criteria and Government policy can change and it is uncertain. Therefore, I am looking for a long-term answer and a long-term commitment over a generation, with payback over a generation. I do not want any favours. I do not want social or ethical money from somebody trying to help me out. I want money from the hardest-faced capitalist who can be found in the toughest financial market that can be found, who sees it purely as a great investment that will yield them a return—not because they want to help the kids in Nottingham, North or any of the other constituencies represented here today, but because there is a tough case for it as a money-making scheme.

I need to devise a plan with the Treasury and others. I have pulled together a group of high-powered people from the City of London and the public and voluntary sectors to work on the matter, and I hope that collectively we will come up with something. As a constituency entrepreneur, I am happy to continue working on it with friends in this room, but I hope equally that the massive possible returns will interest the Treasury in working on its own to explore the possibilities.

There are some interesting points that I could make on the UK system of finance, but I shall try to avoid making them. One that I must mention is that local government often does not have the capability to make independent decisions, even where it sees ways to tackle local problems sensitively and make large savings.

David Taylor: My hon. Friend made a point earlier in his excellent speech about local government’s freedom to innovate. At times local government has had that freedom. In 1973, Margaret Harrison, an organiser of voluntary work in my county of Leicestershire, created Home-Start, one of the parents of Sure Start. At the time, local authorities were not constrained too much by league tables and targets. The problem with Sure Start, which is now funded and directly managed by local authorities, is that a layer of bureaucracy has been inserted into it—targets for Play-Doh proficiency and things of that kind—which obfuscates the purpose of the exercise. There can be risks. I am a big supporter of
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giving local governments freedom, but they should not be led astray into thinking that they must have a target framework within which everything must operate, because that is damaging.

Mr. Allen: I am just about to come to the question of local government, and I will address my hon. Friend’s points directly then. I hope, Mr. Martlew, that you feel that this has been a genuine debate. I have forgone pages of script to keep that debate going. It has been extremely useful. As an aside, I can only wish that Westminster Hall was used more frequently for exchanges such as this and less frequently as a mini-Commons Chamber where we do not listen to one another.

In the short time left to me, I shall outline a couple of possibilities, which I put to my right hon. Friend the Minister so that there are no surprises and so that we can have a further dialogue. They illustrate the scope of the task.

It is clear that in extraordinary times such as these, the unthinkable, such as nationalisation of banks, can become commonplace rapidly. The most radical proposal is full independence for local government. I say that it is the most radical; it is actually commonplace in most western democracies, but it is a rather radical suggestion in the imperial United Kingdom. Each local government unit would have the freedom to borrow against its credit rating for any purpose, using any means that it could persuade financial markets to accept. Central Government would have to stand aside; it could neither approve the borrowing nor give any guarantee on default.

As in the United States, borrowing could be subject to local referendum. Why not involve people? They often say, “I’m sick of those blinking kids down on the street corner. Can’t we do something about it?” Many people do not believe in “hang ’em and flog ’em.” Many appreciate that youngsters should be helped. “Give them something to do,” they say. “Why can’t they help their mum? Where’s the health service?” Local people appreciate that answers can be devised locally, so why not involve them in local referendums?

Municipal bonds are long established in most democracies, and are regularly used to fund long-range early intervention policies. They are an attractive way to do so, as many investors are willing to hold long-dated bonds until maturity and accept no returns in the early lifetime of the bonds. Bonds are also tax-exempt in the United States.

When I last considered the subject, in the middle of last year, there were 50,000 state and local entities in the US alone that could issue securities and more than 2 million separate issues outstanding, with a combined value of $1.7 trillion. More than 5 million US households owned municipal bonds directly or indirectly, and I understand that they have become still more popular since the crash in other asset prices. US municipal bonds are available to British investors, with the curious result that people in Nottingham can invest in the future of children in Colorado but cannot invest to finance similar packages or schemes in their own city.

A less radical proposal, but one that would still require political will, would be to have a new national savings issue dedicated to early intervention. Its proceeds
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would be ring-fenced and re-lent to local government or other vehicles to finance approved programmes. That might be attractive to lenders and markets because of the guarantee against default, but it would obviously be less attractive to local government because it would subject all its early intervention activities to central Government control or oversight. However, I am sure that local government could live with that.

A still less radical possibility would be for the Government to relax the criteria allowing local government or other structures to borrow directly from the Public Works Loan Board, or to undertake prudential borrowing. At present, these facilities are limited to physical capital projects, such as buildings and transport, which is an issue that I have raised with Treasury officials in the past. If the facilities could be extended to include human capital investment, that could open up a new means of financing early intervention. I hope that we can also explore these ideas, without commitment, with the Minister and his colleagues over the next year or so.

The Government might also consider the possibility of creating special purpose early intervention trusts, or socially responsible early intervention companies with powers to borrow money. So there could be some arm’s length agreement. It is not beyond our collective wit to come up with some measure in this area.

More simply, the Government could commit dedicated long-term grant aid to early intervention projects from current revenues. That suggestion is not attractive to me or to local government, because it would make those projects vulnerable to a change of mind by central Government when circumstances changed at national level. I would guess that it is not very attractive to the Treasury either, because it would involve committing current revenues far into the future.

Alternatively, the Government could examine the precedent set by the Department for Work and Pensions and work out the cost of a lifetime of public intervention for, say, 1,000 children, then offer half that cost to a private company, for example. The Government would immediately save half the costs of those 1,000 lifetimes and the company would be incentivised to have a brilliant early intervention programme, to retain savings, to increase its profits and to reduce the costs of remedialism, rehabilitation and a lifetime on welfare benefits. These are ideas that I am sure we can explore across the party divide and through the good offices of Government.

A further very simple proposal is that the Government could match the baby bond with an equal donation to each local authority or trust for each newborn child in its area, with the proceeds to be spent on early support programmes.

Whatever new investment vehicle is created for early intervention, it will face one key question and I hope that colleagues will help me in trying to think it through. How do we identify and capture the combined savings from early intervention and pay back the investors or original grant aid? That is the key question and it is one that I hope we can work with the Treasury to think through. I have thought about it a lot and I do not pretend to have come up with an answer yet. I hope by the end of the year to be able to pull together some of the work on that issue. It is the key question. The rewards of early intervention are real, but they do not always take the form of a stream of money income or a specific asset that rises in value.

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Mr. Kidney: This is a footnote to the point that my hon. Friend has just made. At the local level, we want people to spend to save, as he powerfully argued today. At that level, it may be that one person or body, such as the council, is required to do the spending, and another person or body, such as the criminal justice system or the NHS, will make the saving. Obviously, therefore, the need is for us to use these powerful messages to invade the local activity in every organisation. These days, the Government like that activity to be governed by local area agreements or multi-area agreements. However, is it not the case that we need to mobilise the Government, the Audit Commission, ourselves and the media if possible, to invade that process of local activity and make this issue a priority?

Mr. Allen: First, we again need the strategy and the highest-level political commitment, and I do not just mean whoever happens to be the party leader in power at that time. There must be a consensus and the strategy must be driven, in almost Swedish style, over 30 or 40 years. So we need that core commitment and strategy in place.

In addition, we need to ensure that the instruments that we are currently developing in Whitehall, whether they are local area agreements or other targeting instruments, are seen as being less crude and intrusive and more related to showing nimble and lively sensitivity locally, so that people can figure out what is happening locally. That is the alternative to a one-size-fits-all approach, where the name of the city is simply changed. We need instruments that genuinely reflect local circumstances.

Even in my own city of Nottingham—I am sure that it is also the case in my hon. Friend’s constituency —there is a big white working-class former council estate area, which I represent, and next door there is a very different, ethnically diverse inner-city area; my hon. Friend studied there and will recall it well. Even locally, therefore, we need to be sensitive, so that some of the crudity of approach that is imposed by one-size-fits-all thinking is loosened up and made much more sensitive, so that it can react a little more nimbly to local circumstances. Then, as my hon. Friend said earlier, there will be the resources locally to achieve that type of early intervention effectively.

The rewards of early intervention are not always that obvious and they take the form of outcomes for children throughout life that are better than the outcomes for children who did not experience early intervention. How do we value that difference? That takes us back to the key question that I referred to earlier about capturing savings. I think that the answer entails comparing two cohorts of children, as has been done in New Zealand and other countries, to establish the difference between a cohort of children who have experienced early intervention and a cohort who have not experienced it. My right hon. Friend the Member for Chingford and Woodford Green and I have asked party leaders to consider this proposal, as one of the key recommendations at the end of the book that we put together.

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