The
Committee consisted of the following
Members:
Chair: †
Mr
David
Crausby
†Blunkett,
Mr David (Sheffield, Brightside and Hillsborough)
(Lab)
Chapman,
Mrs Jenny (Darlington)
(Lab)
†Glen,
John (Salisbury)
(Con)
†Goldsmith,
Zac (Richmond Park)
(Con)
†Goodwill,
Mr Robert (Scarborough and Whitby)
(Con)
†Graham,
Richard (Gloucester)
(Con)
†Griffiths,
Andrew (Burton)
(Con)
†Gummer,
Ben (Ipswich)
(Con)
†Hands,
Greg (Chelsea and Fulham)
(Con)
†Hanson,
Mr David (Delyn)
(Lab)
†Hoban,
Mr Mark (Financial Secretary to the
Treasury)
†McCann,
Mr Michael (East Kilbride, Strathaven and Lesmahagow)
(Lab)
†Mudie,
Mr George (Leeds East)
(Lab)
†Paisley,
Ian (North Antrim)
(DUP)
†Swales,
Ian (Redcar)
(LD)
†Trickett,
Jon (Hemsworth)
(Lab)
†Williams,
Stephen (Bristol West)
(LD)
†Williamson,
Chris (Derby North) (Lab)
Ben
Williams, Committee Clerk
†
attended the Committee
Fifth
Delegated Legislation
Committee
Tuesday 20
July
2010
[Mr
David Crausby
in the
Chair]
Draft
Child Trust Funds (Amendment No. 3) Regulations
2010
4.30
pm
The
Financial Secretary to the Treasury (Mr Mark Hoban):
I beg
to
move,
That
the Committee has considered the draft Child Trust Funds (Amendment No.
3) Regulations
2010.
It
is a pleasure to serve under your chairmanship for, I think, the first
time, Mr Crausby. As hon. Members will know, the Government announced
in May that Government payments to child trust funds would reduce and
then stop, to help to reduce the budget deficit. The regulations start
to implement those changes by reducing a number of payments and
stopping others. They will be followed by a Bill, which we shall bring
before Parliament later this year, to stop the remaining Government
payments.
I
realise that some parents will be disappointed by the changes, as will
child trust fund providers. Many hon. Members here today will be
disappointed, too. Of course, if we had unlimited resources, it would
have been possible to continue Government payments into child trust
funds, but that is far from being the situation. Instead, the
Government have inherited the largest deficit in Britain’s
peacetime history. Tackling that deficit is the greatest economic
challenge that we face and our top priority. That will support the
recovery, creating the conditions for businesses to grow and enabling
interest rates to be kept lower for longer, but it requires us to take
tough decisions, which is what we have had to do on child trust funds.
It would have been simply unaffordable to continue to spend more than
£500 million a year on them. We therefore believe that it is
right to reduce and then stop Government payments. That will save
£320 million this year, and more than £500 million in
each year in the
future.
The
regulations are the first step in achieving the savings. They will
reduce starting payments, end age seven payments and end the additional
payments into the child trust funds of disabled children, although we
will be recycling the funding allocated for those payments. I shall
talk about each of those measures in
turn.
The
first is the reduction in starting payments, dealt with by regulation
3. At present, all children for whom child benefit is paid have
£250 paid into their child trust fund account by the Government
when the account is opened. Children in lower-income families later
receive a further £250. The regulations will reduce both those
payments to £50. That will affect all children for whom child
benefit is first paid after 2 August, and therefore all children born
after that date. However, children born before 2 August will be
unaffected, as long as child benefit is paid for them by 2 August. I
should explain
that the date is 2 August rather than 1 August because 2
August is a Monday and child benefit awards always start on a
Monday.
As
child benefit payments can be backdated by up to three months, a claim
will need to be made by 1 November in order for child benefit to be
paid by 2 August and therefore for the child to be eligible for the
current level of Government payments into their child trust fund. That
gives parents a three-month window in which to make a claim. For
example, if a child is born on 31 July and child benefit is claimed by
1 November, it will be backdated and paid from the Monday after the
child’s birth, which will be 2 August. The child will therefore
become eligible for a child trust fund on 2 August and will be eligible
for the current level of
payment.
A
similar three-month window will apply to children whose immigration
control is lifted. That means that a child with a child benefit award
who would be eligible for the current level of payment but for the fact
that they are subject to immigration control will be eligible if their
immigration control is lifted by 1
November.
I
want specifically to mention looked-after children, in the care of a
local authority, as they are treated slightly differently. Those
children are eligible for a child trust fund even if they are not in a
child benefit claim, and they currently receive £500 when their
account is opened. That payment will be reduced to £100 by the
regulations. In both cases, that is the same total amount as for
children in lower-income families. Again, children born before 2 August
may be eligible for the current level of payment, and again we have
allowed a three-month window for children to become eligible by that
route.
The
regulations ensure, for example, that a child born on 31 July for whom
no child benefit claim is made, and who is then taken into care at any
time up to 1 November, will also be eligible for the existing higher
payments. We want to ensure that children who qualify for receipt of
the payments receive them, so we have added the three-month window. I
accept that that adds complexity, but it also creates
fairness.
I
come now to the other two payments affected by the regulations.
Regulation 4 ends all Government payments at the age of
seven—the £250 payment made to all children, the
additional £250 given to children in lower-incomes families, and
the total of £500 paid to children in care. Those payments will
stop for all children turning seven from 1 August 2010.
Regulation 5
ends the annual payments made into the child trust funds of disabled
children. The payments due this year will be made, but they will stop
from 2011-12. As we announced on 24 May, however, the money that would
have been used to make those payments in future years will be recycled
into additional respite breaks.
As I said,
these changes are the first step in the Government’s changes to
the child trust funds. We intend to introduce primary legislation later
this year to end eligibility for child trust funds for children born
from January 2011 onwards. As I said at the start, I realise that the
changes are disappointing, but they are necessary.
I also
realise that the changes will have a particular impact on many child
trust fund providers, ending eligibility for child trust funds and
reducing their value for children born between August and December this
year. Some providers are concerned about the profitability of offering
accounts that start with £50, rather than £250, from the
Government.
Again,
the change was necessary. If we had simply waited until January to stop
all Government payments, rather than reducing them from August, we
would have reduced our savings this year by £190 million, which
is a significant sum. However, we are looking closely with providers at
whether there are any changes that we can make to mitigate the effects
of the proposals.
We are also
carefully considering the suggestion made by some providers and others
that the child trust fund wrapper continue to be available to parents
even once Government payments have ended. Saving levels have been too
low in recent years, and we want to encourage people to save and
invest, including for their children. I hope that Members will agree
that it is right for us to take the time to think about the best way of
doing that, and I will meet a number of stakeholders later this week to
discuss the issue.
Of course,
any options for encouraging saving will need to fit with our top
priority, which is to tackle Britain’s unprecedented deficit.
Failing to do so would threaten higher interest rates for families and
businesses, and would mean high levels of debt, which would burden
future generations. As I said, the deficit has unfortunately made the
child trust fund simply unaffordable. Stopping payments is therefore
necessary, and having made that decision, it is right that we should
look to maximise our savings this year by reducing the payments
first.
Stephen
Williams (Bristol West) (LD):
Will my hon. Friend confirm
that in addition to dealing with the deficit, one of the
Government’s big priorities is to invest substantial amounts in
children from disadvantaged backgrounds through the pupil premium? In
fact, releasing money from the child trust fund will enable us to put
£2.5 billion into the pupil premium.
Mr
Hoban:
Indeed. My right hon. Friend the Chancellor took a
number of decisions in the Budget to redirect resources towards the
most vulnerable and poorest families, and the measure before us
identifies savings that can be used towards that end. We have to make
difficult choices to make sure that we protect the most vulnerable
while laying the foundations for our future economic
recovery.
Mr
David Blunkett (Sheffield, Brightside and Hillsborough)
(Lab):
In view of the question that has just been put by the
hon. Member for Bristol West, will the Minister tell us whether a
calculation has been made of the reduction in funding to disadvantaged
families as a whole as a result of the reduction of aggregate external
funding to local government, including the area-based grant, and the
withdrawal of additional educational funding, which will be
redistributed into the pupil premium? How much loss will be incurred
with regard to the future savings ratio because of the reduction in the
number of families saving and making additional contributions? That
figure had risen from 18% to 31% during the life of the child trust
fund.
Mr
Hoban:
This is not a debate about local authority funding,
and I am sure that you would not wish me to go down that route, Mr
Crausby. However, on the issue of saving, the right hon. Member for
Sheffield, Brightside
and Hillsborough should remember that under his Government, the savings
ratio was negative in 2008. One in four families entered the recession
with no savings at all, while half of families had savings of less than
£1,500, so the previous Government’s record is less than
perfect in this area.
We as a
coalition Government are committed to finding ways to encourage more
people to save. That is why I announced last week our plans to launch
an annual financial health check, which will help families assess their
debt levels and how they can both provide for immediate savings needs
and save more for retirement. We must ensure that good building-blocks
are in place to help families save for the future. Better-quality
financial advice is part of the solution to that problem. I hope that
the right hon. Gentleman will welcome that
announcement.
Mr
Michael McCann (East Kilbride, Strathaven and Lesmahagow)
(Lab):
The coalition Government have made much play of the
fact that they want to encourage more people to save. Does the Minister
accept that child trust funds were one of the best possible ways to
achieve that? Through an initial Government investment, they encouraged
not just the immediate but the extended family to contribute to a
child’s account for the rest of the child’s life, in
order to create a great platform from which to move on and have a
successful life. Does he not accept that by making the abolition of
child trust funds a priority, this Government will damage
saving?
Mr
Hoban:
I have two points to make in response. First, as I
said earlier, we are working with some of the businesses involved to
consider how we can continue to encourage saving for children. There is
no barrier to putting money into an existing child trust
fund, or to using one of the many savings vehicles available on behalf
of a grandchild, niece or nephew, or any child. There are plenty of
vehicles that can be used by people who want to save money for their
children. We need to think of cost-effective ways to encourage more
families to think about saving, not just for immediate needs but for
long-term needs.
We believe
that stopping the payments is necessary. Having made that decision, it
is right that we should maximise our savings this year by reducing the
payments. That will reduce the need for spending cuts elsewhere, tax
rises or borrowing, which would be required if we took a different
approach. The regulations are the first step in implementing the
changes to child trust funds. I believe that they are necessary and
will make an important contribution to reducing the budget deficit, and
I hope that Members will support
them.
4.42
pm
Mr
David Hanson (Delyn) (Lab):
It is a pleasure to serve
under your chairmanship for the first time, Mr Crausby; it is a
pleasure to be here today for many reasons. This is the first time for
13 years that I have spoken from the Opposition’s side of the
Committee Room. I must say that it is not a very comfortable place to
be, as today we have before us a fairly shoddy measure, which I warn
the Minister we will oppose.
In my view,
the child trust fund has been a success of this
Government—
Mr
Hoban:
The previous
Government.
Mr
Hanson:
Indeed. Old habits die hard, as the Minister will
know. The child trust fund is one of the successes of the previous
Government. In my view, it was a success because it helped people to
save, benefited the poorest in society, and created a framework under
which those who hold such funds will have a dowry, to which the state
and their families contributed, that gives them a financial basis for
the future.
It is
disappointing that one of the first acts of the coalition Government
has been to introduce the regulations, which will reduce the payments
pending the scheme’s effective abolition in January next year.
Perhaps that is because the Chancellor of the Exchequer and the Prime
Minister do not need child trust funds, having trust funds of their
own. From my perspective, however, child trust funds are important and
have benefited many people in my constituency and elsewhere.
More than 5.5
million children now have child trust fund accounts, a figure that will
rise to 6.5 million by the end of the year. At the moment, 10 million
adults have paid into those child trust funds since they were envisaged
and enacted. That is a success. Many people who now contribute to child
trust funds, putting in their hard-earned private money to supplement
the money provided by the state, had never saved for their children
before, or contributed in such a way, and would not have thought of so
doing. They are now part of the savings culture that the Government
propose to encourage through other
measures.
On active
placements by parents, an average of 74% of parents open their
child’s trust fund account on receiving the initial trust fund.
Because of steps taken by the previous Government, 100% of children
receive the fund thanks to the safety net. Therefore, the opportunity
is not lost, even by those who, for whatever reason, do not contribute
in that hectic first year.
That figure
of 74% of people contributing to the child trust fund compares with 40%
of the adult population who have a private pension and an even lower
figure of 30% of the adult population who have an individual savings
account. So it is an important contribution, whereby the generation of
that dowry has helped people to contribute to the child trust fund for
the
future.
Richard
Graham (Gloucester) (Con):
I am grateful to the hon.
Gentleman for giving way.
Mr
Hanson:
The right hon.
Gentleman.
Richard
Graham:
I am grateful to the right hon. Gentleman for
giving way. When he looks at constituencies such as mine, which have
high numbers of relatively poor people who are having these child trust
funds reduced and then closed, does he not see that the previous
Government bear the responsibility for having wasted so much money on
unnecessary projects and bureaucracy and that, unfortunately, it is now
some of the poorest people in this country who are having to pay for
those mistakes?
Mr
Hanson:
I presume that the hon. Gentleman will go out
tomorrow and issue a press release to the good people of Gloucester,
saying to the 8,489 people there who have already received money from
the child trust fund that they should give it back because he does not
support the fund? Will he do that?
Richard
Graham:
With respect, I will ask the people of Gloucester
to address my predecessor and the right hon. Gentleman’s
Government, asking them to apologise for having misled people so
severely over such a long period of time.
Mr
Hanson:
I am sorry, but I am sure that the 8,489 people in
Gloucester who have already received the child trust fund welcomed it
and have contributed to saving for that resource in the
future.
Stephen
Williams:
I am sure that the right hon. Gentleman is
absolutely right that people are grateful for free money from the
state—who would not be grateful? However, he said that the fund
has benefited millions of families up and down the country. Can he say
which proportion of society has benefited the most from the fund? Is it
the wealthiest proportion of society or the
poorest?
Mr
Hanson:
To date, there are 6,742 families in the
constituency of Bristol, West who have received the child trust fund
and who would have welcomed that money.
There is one
option that I would very much welcome the Financial Secretary
considering. If he intends to abolish the child trust fund—which
he is—he could abolish it just for the richest people in
society. That is one of the options, but he has not considered it. He
is abolishing the fund right across the board, including for poorer
people in society, for people with disabilities downstream and for
others. He could have considered other options if he needed to save
money, but he has chosen to abolish the whole scheme. That shows that
the Conservative-Liberal coalition is not concerned about helping
poorer people to reach maturity at 18 with a dowry to help them to face
some of the challenges that they will face in their
future.
Stephen
Williams:
I remind the right hon. Gentleman that one of
the key terms in the coalition agreement is to introduce a pupil
premium, which the money released by the abolition of the child trust
fund will help to fund. The biggest barrier to people saving is their
capacity to save; the biggest barrier to their capacity to save is
their capacity to earn, and the biggest barrier to their capacity to
earn is their education. The pupil premium will address
that.
Mr
Hanson:
The hon. Gentleman comes back to the initial
point, which is that families in the lowest income bracket are now
saving a higher proportion of their household income thanks to the
child trust fund than those from more affluent backgrounds. The fact
that we have encouraged people who traditionally have not saved to save
for their children’s future, including a contribution from the
state to help them, has been a positive
benefit.
Mr
Blunkett:
Does my right hon. Friend also accept that 50%
of the total money allocated and invested by the Government on behalf
of the community went to the 1.5 million lowest-income families, who
have an income of £16,000 a year or
less?
Mr
Hanson:
My right hon. Friend makes a very valuable point,
which I will certainly follow up.
Ben
Gummer (Ipswich) (Con):
I really do understand the
disappointment that the right hon. Gentleman and other hon. Members are
experiencing at the passing of the child trust fund, especially the
right hon. Member for Sheffield, Brightside and Hillsborough, who was a
key proponent of the fund. I laud the aims behind the fund.
Nevertheless, cannot the right hon. Gentleman lay the blame for the
abolition of the fund not with this coalition Government but with the
right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who has
bankrupted this nation singlehandedly? Many Opposition Members worked
hard to get rid of him during his time in office and they know the full
reason why they did so. It is really not us—the coalition
Government—who should be blamed for this
measure.
The
Chair:
Order. With respect, I ask right hon. and hon.
Members to confine their comments to the measure before
us.
Mr
Hanson:
The hon. Member for Ipswich raises the valid
question of how we tackle the deficit, which has been caused by a range
of issues. Those issues cannot all necessarily be laid at the door of
this Government but they are of international concern. We went into the
election with a deficit-reduction plan that looked at the long-term
issues and at some other alternatives, which included increasing
national insurance and making some savings. The fact is that the
Financial Secretary and the Chancellor have chosen to cut the resources
to those who are the poorest and most in need in
society.
Ben
Gummer:
Is it not incumbent on the right hon. Gentleman to
suggest what cuts he would propose to make elsewhere to be able to pay
for the continuation of the child trust fund? We would be interested to
hear
that.
Mr
Hanson:
I would be happy to go down that route, Mr
Crausby, but I suspect that you would not want me to do that today. I
am happy to refer the hon. Gentleman to the Labour manifesto.
[Interruption.] In my defence, I recognise that the public
elected only 258 of us into this parliament. None the less, we had a
deficit reduction plan as well as proposals to raise national insurance
and proposals in other areas. In the previous Parliament I was the
Minister responsible for policing and we had proposals to save money in
that budget and in others. If the hon. Gentleman looks at those issues,
he will see that we did have choices, and this was not one of
them.
Mr
McCann:
There is a queue of people waiting to intervene.
May I suggest that the Government have chosen to abolish the child
trust fund because the previous Government had to bail out Conservative
bankers to the tune of billions of pounds and, as a result of those
Conservative bankers’ actions, revenues dropped in this country
by
25%?
The
Chair:
Order. I know that emotions are bound to run high
on this matter, but I respectfully ask hon. Members to confine their
comments to the measure before us.
Mr
Hanson:
I will certainly try to keep within your
strictures, Mr Crausby.
The
important point is that there will be a debate outside this Committee
about the deficit reduction plans of both the current and the previous
Governments. Both parties have made choices. The choice that the
Government have made in this order is unfair. Moreover, it is not
conducive to the long-term interests of the savings economy in our
society. It will not help poorer people save for the future and it is
not fair or
equitable.
Andrew
Griffiths (Burton) (Con):
The right hon. Gentleman
referred on a number of occasions to the previous Government’s
debt-reduction policy. He will know very well that the International
Monetary Fund, the OECD and the European Commission all expressed their
concern about the inadequacy of the debt-reduction plan. Will he tell
us who actually supported
it?
Mr
Hanson:
I think that I am being dragged down avenues that
you would rightly admonish me for going down, Mr Crausby. We can have
the debate about the debt-reduction plan outside this Committee. Let us
simply say that there is a difference of opinion between the coalition
and the Labour party about how we deal with that debt-reduction plan.
The outcome of today’s deliberations is that an unfair choice
has been made by the Con-Dem Government, and it will hit the poorer
people in our community the hardest.
Before the
child trust fund was in place, the average amount saved each month in
what was then called the Children’s Mutual baby bond was around
£15 a month. The average now saved in a child trust fund
provided by the Children’s Mutual is £24 a month, which
is an increase of 60%. The scheme has encouraged and increased the
amount of saving in our community. Some 1.4 million parents,
families and friends are contributing to child trust fund accounts this
very month, with in excess of £22 million being added every
month. I would have thought that the Government would have encouraged
that saving, been grateful that that had happened and been happy that
those initial contributions had made such a
difference.
Richard
Graham:
If I understood the Financial Secretary correctly
earlier, the trust funds will still be open for savings to be deposited
by friends or family, and will grow in the usual way associated with
the trust funds. The only thing being stopped is the sort of saving
that Opposition Members are most keen on: the sort where the Government
hand out money. I suggest to the right hon. Gentleman and his
colleagues that the most effective form of savings are not simply
provided by the Government; the Government should rather provide the
framework within which, and the background against which, people can
generate savings. That will still apply to the trust
funds.
Mr
Hanson:
With due respect to the hon. Gentleman, that is
precisely the benefit and the point of the child trust fund. I would be
interested to hear the Minister confirm that he will keep the
infrastructure post-January, so that individuals can contribute
privately to the trust funds if they wish, because the cost of that
might be between £2 million and £4.5 million a year. Will
the infrastructure be maintained, so that children can contribute to
it, at least with their parents?
The hon.
Member for Gloucester misses the point of the child trust funds, which
is to show that the state is investing in that individual and, in doing
so, is encouraging the parent to invest in that individual. The very
fact that a £250 contribution—for the poorest families it
was £500—was made seemed, for many people who had not
saved before, to create an element of partnership between the state and
the family. That contribution was meant to help children meet the
challenges of their future life when they matriculated at the age of
18. That was the whole point of the trust
fund.
Richard
Graham:
Will the right hon. Gentleman give
way?
Mr
Hanson:
I would like to make some progress, if I
may.
Richard
Graham:
Will the right hon. Gentleman give
way?
The
Chair:
The right hon. Gentleman is clearly not giving
way.
Mr
Hanson:
I would like to make some progress, because many
other hon. Members want to contribute, and this is a very short debate
with a maximum duration of an hour and a half. The value of the trust
funds has been shown clearly by the number of parents and family
members who have contributed to them. We have in excess of £2
billion of funds under the management of child trust fund
accounts.
Mr
Hoban:
Will the right hon. Gentleman give
way?
Mr
Hanson:
For the hon. Gentleman I will certainly give
way.
Mr
Hoban:
Will the right hon. Gentleman tell the Committee
what proportion of families on a low income contribute to child trust
funds?
Mr
Hanson:
I certainly can. I will happily share the figures
with the hon. Gentleman; I shall refer to them in a moment. The
proportion is certainly higher than it was. The figures that I have
show that more people now contribute. Prior to the child trust fund,
only 18% of children had regular long-term savings. That figure has now
risen to 50%. Within that figure, there is an increase in the number of
poorer people
involved.
Mr
Hoban
rose—
Mr
Hanson:
I am sure that the hon. Gentleman has a briefing
from the
Treasury.
Mr
Hoban:
May I put the right hon. Gentleman out of his
misery and say that only 13% of families with children on a low income
contribute to the child trust fund?
Mr
Hanson:
If that is the
case—
Richard
Graham:
Will the right hon. Gentleman give
way?
Mr
Hanson:
I must put the hon. Member for Gloucester out of
his misery, because he seems to be bobbing up all the time. Let him say
his piece.
Richard
Graham:
The right hon. Gentleman said that 6,500 people in
my constituency would be very disappointed about the child trust funds,
so it is relevant that he has heard from my hon. Friend the Minister
the precise low figure relating to the number of low-income families
who contribute to these savings funds, of which he is so proud. If they
were the success that he intimated they were, surely people would have
made considerably larger and more frequent contributions to the savings
plan.
Mr
Hanson:
My answer is twofold. First, if that figure is
correct—I have no reason to disbelieve it—13% of people
are contributing. Before the scheme, that figure was zero. Secondly,
the very point that the Minister makes shows that he could have made
other choices. He could have said, “Let’s put a cap on
the income that people who qualify for a child trust fund can
have.” He chose not to do that; he chose to abolish the whole
scheme, including for the 13% of people he has
mentioned.
Jon
Trickett (Hemsworth) (Lab):
May I draw my right hon.
Friend’s attention to the comments of one of the leading
providers of CTFs, the Children’s Mutual? It
said:
“The
CTF is the most successful financial initiative we’ve ever had
in this
country”.
The
spokesperson for that organisation talks about the well-off and goes on
to state that 30%—not 13
%—
“of
households with an income of £19,000 or under typically save an
additional £19 a month for their child via
CTFs.”
Those
are the figures from the industry
itself.
Mr
Hanson:
I am grateful to my hon. Friend for those figures.
They add to the argument that the child trust fund is a generator of
savings for people from the community at
large.
Andrew
Griffiths:
The right hon. Gentleman rightly points to the
number of families who are saving through the child trust fund, and
everyone in the House wants to encourage an increase in saving.
However, does he recognise that as well as the racking-up of almost
£1 trillion of national debt, since 1997 there has
been a huge increase in personal debt, peaking in 2008? That is a
result of the previous Government’s fiscal
policies.
Mr
Hanson:
We have been round those houses a lot, and
we disagree on that; that is the nature of our political life. There is
an established need for the child trust fund. The amount that people
pay for their child between the ages of 18 and 21 is estimated to be
around £13,500 a year. The average debt owed by an 18-year-old
is £5,100; that rises to £8,000 for 25-year-olds. The
cost of a university degree is currently around £10,000 a year.
Those figures will undoubtedly grow. Whatever
Government hold the reins over the next 18 years, changes will be made
to expand educational opportunity, and that will involve parental and
other contributions. That is necessary, and the purpose of the child
trust fund was to give children a base for the
future.
The
Financial Secretary will know that as recently as February this year we
debated, probably in this very Committee Room, an extension of the
scheme to children with disabilities, and we included measures that he
is removing today. Mr Crausby, will you please ensure that we check the
microphones in this room today? Hansard does a fantastic job,
but I would like today’s record to be carefully checked. When I
look back to February, when those measure were included, I see that it
was not opposed by the Liberal Democrats or the Conservatives. The
Financial Secretary
said:
“It
is a pleasure to serve under your chairmanship once more, Mr Olner.
Although we in the Conservative party intend some reforms for child
trust funds, we recognise that additional support is required for
children with disabilities and we have no objections to this statutory
instrument.”
I
presume that the microphones picked that up badly, or that there was a
fuzzy noise in the Committee Room, because the Financial Secretary has
turned that comment on its head since then. The then Member for South
East Cornwall, Mr Colin Breed—a Liberal
Democrat—said:
“it
is clear that disabled children have a greater need than the ordinary
child. Therefore if there is an opportunity to address that, I have no
doubt that it is a good thing…I have no objection to this
statutory instrument, although at some stage there will have be a wider
ranging review of the value of expenditure on trust funds. On that
basis, I am happy to support the
regulations.”—[Official Report, Eighth Delegated
Legislation Committee, 10 February 20108; c.
4.]
Hon.
Members said one thing before the election, and another after. The
Financial Secretary is standing on his head, as are the Liberal
Democrats, because they are removing child trust funds but were too
scared to tell the truth before the
election.
Stephen
Williams:
May I put the right hon. Gentleman right? I was
involved in Liberal Democrat education policy for virtually all the
previous Parliament. I wrote the manifesto for the 2010 general
election and was a candidate at the 2005 general election. We said in
both those manifestos that we would abolish the child trust fund. We
have been completely consistent for more than five years. The right
hon. Gentleman seems to be referring to a statutory instrument on
disability, not the child trust fund
generally.
Mr
Hanson:
The hon. Gentleman should know that the then
Member for South East Cornwall was commenting on a statutory instrument
that in February provided an extension of the child trust fund to
disabled children, which he did not oppose. The Financial Secretary did
not oppose it, but today he has changed his mind. I am sure that we
will return to the economic debate on such issues, but the fact is that
the Conservative party and the Liberal Democrats have both turned the
issue on its
head.
Ian
Swales (Redcar) (LD):
The right hon. Gentleman should read
again what the then Liberal Democrat Member said. He said something
about the need for a wide-ranging review of trust funds. As my hon.
Friend
the Member for Bristol West said, it has been in our manifesto for two
elections running that we will abolish child trust
funds.
Mr
Hanson:
The hon. Member for Redcar will presumably go back
to Redcar and say that whatever the Liberal Democrats said in February
in support of an issue does not count in July when the matter comes
before us. [
Interruption.
] The hon. Gentleman won
his seat in a democratic election—I am not challenging his
authority to say what he says. But he can still be
wrong.
In
February, in a Committee Room just like this, Colin Breed, previously
the Liberal Democrat Member for South East Cornwall, supported what was
before the Committee on that day. Today, the hon. Members for Redcar
and for Bristol West will vote against the proposal. On that day in
February, the hon. Member for Fareham, now the Financial Secretary to
the Treasury, had no objections to the statutory instrument, but today
he will turn, stand on his head and vote against what he supported in
February. We need a wider exposition of that position in due
course.
The
reason why all that is important is that, in the future, many thousands
of children will not benefit from the child trust fund—poorer
children who would have had the higher premium, richer
children’s parents who would have had the lower premium,
disabled children who would have had help and support and, perhaps
worst of all, looked-after children who do not have parents.
Looked-after children are in care and child trust funds provided them
with an element of support, so that when they left care at 18 they had
some dowry in their
pockets.
Whatever
else, choices have been made. The Financial Secretary could have come
to the Committee with a statutory instrument stopping the child trust
fund for the richest but keeping it for the poorest, or even stopping
it for disabled children, if that was his view. However, he has chosen
to stop the child trust fund payments for looked-after, disabled,
richer and poorer children across the board—he has made that
choice to save the resources. He could have amended the scheme or
salamied it in any way, shape or form he wished, but he has chosen not
to do anything. Looked-after children who are now in care, do not have
parents and currently qualify for help and financial support will now
face not having that dowry at the age of 18. That, in particular, is
shameful.
The
Minister does not have to listen to me, because I am a bigoted, biased
old Labour politician, and I am expected to argue such cases on behalf
of the people that we represent. However, he might want to listen to
others: Phillip Blond, the director of ResPublica; Alison Garnham, the
chief executive of the Daycare Trust; Lisa Harker, the director of the
Institute for Public Policy Research; Professor Julian Le Grand; the
chief executive of the YWCA; Belinda Phipps of the National Childbirth
Trust; Katherine Rake of the Family and Parenting Institute; John Reeve
of the Family Investments
organisation—
Mr
Hoban:
David White of the Children’s
Mutual?
Mr
Hanson
—or David White, the chief executive of the
Children’s Mutual. Those individuals have written not just
saying that they object to the draft regulations
but also wanting assurances, which I hope that the Financial Secretary
will give at the end of the debate, about the future of the
scheme.
Even
if the Financial Secretary chooses not to put Government resources into
the child trust funds now, at least the infrastructure is there, for a
cost of around £4.5 million per year maximum. If a future
Government wished to reinstate those payments, they could do so, if the
economy picked up or if the hon. Gentleman chose to put money in for
looked-after, disabled or poorer children—even he might do that.
Today is the opportunity for those assurances, before we face total
abolition under primary legislation, probably in the early part of next
year.
Her
Majesty’s Revenue and Customs issued a total of 823,504
children’s trust vouchers last year—70,000 per
month—and of that more than 500,000 were opened directly by
parents; a further 211,000 were opened by HMRC when vouchers had
expired. There is a real hunger for the scheme, which has generated
help and support for the poorest in society. I look forward to the
Financial Secretary telling the Committee not just why he has made the
choice to abolish the trust fund as a whole but why he has made that
choice for looked-after children. Why has he chosen to turn on his head
about disabled children? Why has he made the choice not to allow even
the poorest 13% to benefit? The reason is that the measure is
ideologically driven by the Conservatives and their Liberal Democrat
friends. I urge my hon. and right hon. Friends to oppose the
measure.
I
hope that the Financial Secretary will reflect on what has been said.
He still has the opportunity for change in the run-up to the Bill in
January. He would have my support and that of my hon. and right hon.
Friends if he made changes to ensure help and support for people who do
not have the ability to fund their futures after the age of 18 because
of the circumstances of their birth. In my view, one of the
fundamentals that we should be considering is how society helps to
support those individuals. I shall certainly oppose the
order.
5.9
pm
Mr
David Blunkett (Sheffield, Brightside and Hillsborough)
(Lab):
It was said earlier that I had campaigned vigorously
for the development of the child trust fund. I was indeed responsible
for initiating research by the Department of Education and Employment
between 1997 and 2001, and encouraging my right hon. Friend the former
Prime Minister to take up the cause of the child trust fund when he was
Chancellor of the Exchequer. I did so for three reasons.
First, the
country’s greatest long-term challenge is the asset divide,
which is growing by the day. In London and the south-eastern part of
the country, the assets held by domestic owners include the value of
houses that are, for many, passed on from grandparents, parents, uncles
and aunts, which is equivalent to wining the lottery. In many other
parts of the country, there is greater take-up of rented accommodation,
so ownership values are much lower, and the asset values passed on are
lower. It will be a matter of regret in years to come that the divide
is still growing, because it affects not
only the individual’s financial well-being but, as research has
unequivocally proved, the individual’s contribution to
society.
Secondly,
people who have an asset and, therefore, a stake in society, contribute
more not only to society and to their own financial well-being but to
reciprocity and mutuality—including people being more interested
in education and fostering their children’s interest in it and
in voting and participation in what is now being called the big
society. There is a major spin-off, and there will be a major reversal
from that spin-off if we cut the contribution to future asset
accumulation.
Thirdly, we
all agree that there is a savings gap; the ratio in 2008 may have been
neutral. Many, on all sides of politics, thought that we needed to do
something to encourage savings. Nothing could be more radical than
ensuring that every child had a savings fund from the moment they were
born, so that they could inherit a trust fund at the age of 18, up to
an average of £10,000, and could take it forward into their
adult lives.
I have a
threefold criticism of what we did. First, we did not campaign hard
enough to explain what we were doing and why. Secondly, we did not put
enough into the trust funds to demonstrate the change in capital asset
that would be held until the child reached adulthood at the age of 18.
Thirdly, although I argued vehemently with the Treasury that funds
should be ring-fenced, they would have none of it. I believed that they
should have been ring-fenced so that they could be used only in the
initial stages of adulthood for particular long-term gains, such as
making a contribution towards starting a home, paying university fees
or setting up in self-employment or similar work.
Incidentally,
those who think that that was the nanny state ought to have seen what
happened to my mother when my father was killed in a works accident; in
exchange for a small contribution, she had to go to court to be able to
draw down on that money, and so did I until the age of 21. There are
clear precedents, but we live in an era of libertarianism and
ring-fencing the money was thought to be a restriction. I believe that
the population would have warmed to the idea much more strongly if
people had understood that.
Some things
were built into the demise of the scheme, but we could not see the
total contradiction of a coalition Government. The Conservative party
went into the election saying that it would retain the child trust fund
because it encouraged saving. I shall not go into the figures, because
I am talking either to the converted on the Opposition Benches or the
unconverted on the Government Benches. In a sense, we are wasting our
breath, but it is still worth putting our view on the record. The
figures were spelled out by my right hon. Friend the Member for Delyn.
I shall not repeat them, but many trust fund accounts have been opened,
and contributions are being made to them from the family purse and from
friends; that could have been encouraged, and Church and other mutual
giving was something that we could have encouraged in time. I would
have built on that. The Thoresen committee produced a report on money
guidance and encouraging people to open bank accounts, which I hope the
coalition Government will take
forward.
Child
trust funds ensured not only that children had savings by the age of
18, but that their families had engaged with that saving, which was
probably the biggest
step. Many families opted to contribute directly to opening their child
trust fund—more than 85% in one form or another—and for
many of them it was the first time they had taken that positive step,
and they did so for their children’s future. By doing away with
that, we have engaged in short-termism and undermined the reduction in
capital divide, the savings motivation that was built into it and the
chance for 18-year-olds to have an asset that they could use
positively.
Mr
Hanson:
One point that I forgot to mention, and that might
be of interest, is that the Welsh Assembly Government have taken the
policy decision to top up the child trust fund by £50 for every
child. I declare an interest, as my seven-year-old has received that
top-up fund. Does my right hon. Friend agree that when the Minister
responds, he should indicate whether any consultations have been
undertaken with the Welsh Assembly Government or with
providers?
Mr
Blunkett:
We should ask the Minister to indicate clearly
whether the devolved Governments will be permitted to continue not only
with the existing funds, but to open new ones, contribute to them,
albeit modestly, and help the asset divide in Scotland, Wales and
Northern Ireland to become a lot less than it will be in England in
years to come.
I will
comment quickly on the contradictions. To be fair to the Conservatives,
they did say that they would revise the child trust fund and contribute
to the less well-off, but not to the better-off. Although I was unhappy
with that, I believed them and thought that at least those who do not
have the capacity to save as many of us in this Room do will have that
encouragement and support. They will have the kind of encouragement and
support that people have when opening ISAs. We should consider the
£27 billion we spend on subsidising pension pots in this
country, compared with the £500 million a year that it was
costing us to help open and contribute to the child trust
fund.
Now that the
Conservatives are in the coalition, however, they have decided that
they will do away with child trust funds altogether, because the
Liberal Democrat policy was to do away with them. That might interest
the hon. Member for Redcar, whom I welcome to the House—I regret
his victory, not at a personal level, but because I respected his
predecessor greatly. I did not understand why the right hon. Member for
Sheffield, Hallam (Mr Clegg) led the Liberal Democrats to adopt that
short-term policy—although they were not enthusiastic about
long-term policies generally, including Sure Start. They seem to have
an aversion to anything that would change the nature of our society or
improve equality in the long term—anything for a short-term
gain. The hon. Member for Redcar is right that the Liberal Democrats
said that they would do away with the child trust funds, but they did
not say that they would put the money into a pupil
premium.
Stephen
Williams:
Yes we
did.
Mr
Blunkett:
No, they did not. I promise you, Mr
Crausby, that they said that they would reduce infant class sizes with
the money saved from the child trust funds.
Stephen
Williams:
As one of the members of the Liberal Democrat
shadow Cabinet who voted on our education policies in the last
Parliament, I can assure the right hon. Gentleman that we specifically
said that we would abolish the child trust fund to divert the funds
into education spending, specifically through the pupil premium.
Reducing class sizes is one example of how schools could use the pupil
premiums that they would get, and there are many other
examples.
Mr
Blunkett:
I could believe that, particularly if it was a
Liberal Democrat policy, where anything can change overnight. I was
responsible for the first-ever cap on infant class sizes, and for the
investment that made that possible in 1997, 1998 and 1999, so I assure
Members that it was the capital cost that was required to reduce class
sizes. Perversely, that was mainly in the leafy suburbs, in order to
extend the physical environment to make class sizes of 30 or fewer a
viable proposition. It may well have been in someone’s mind that
the pupil premium might affect class sizes, but I understood that it
was supposed to be diverted to children from disadvantaged
backgrounds.
The
Chair:
Order. This is interesting, but could I ask the
right hon. Gentleman to drift back to child trust
funds?
Richard
Graham:
Will the right hon. Gentleman give
way?
Mr
Blunkett:
I will give way, but I hope that the
intervention is on the topic that we are
discussing.
Richard
Graham:
As the right hon. Gentleman’s stated intent
in introducing the child trust fund was to reduce the gap between rich
and poor, and to increase equality, would he not agree that it is
extraordinary that after 13 years of Labour Government, the
inequalities, and the gap between rich and poor, have grown to, I
believe, the highest level since
1961?
Mr
Blunkett:
The gap between the mean of income distribution
and the lowest quartile actually narrowed. The gap between the top and
the bottom did not narrow because we live in a global economy, which I
understood the coalition was in favour of, and did not want to engage
in capping the income of the very richest on the grounds that they
would simply move abroad, as many of them do, in any case, to avoid
even minimal taxation. That is one of the reasons we got in a pickle
with the banks, along with people believing that they could get
something for
nothing.
Richard
Graham:
Will the right hon. Gentleman give
way?
Mr
Blunkett:
I will give way, but, as you rightly pointed out
to me a moment ago, Mr Crausby—I accepted your
stricture—we are moving off the
point.
Richard
Graham:
That was a remarkable statement from a party that
had a Secretary of State who said that he was absolutely happy for
people to get filthy rich.
Mr
Blunkett:
I remember my noble Friend saying that, and he
has been working on it recently, but who am I to
criticise?
Jon
Trickett:
I was fascinated to hear my right hon. Friend
finish that sentence. On behalf of everyone I represent who has
benefited from the child trust fund, I thank him for his work in
conceptualising it. However, was not the point of the fund to address
the capital gap, rather than the income gap? When a young adult gets to
18, they often face capital requirements such as the acquisition of a
house or an education. Many people are excluded from that simply
because their family has not saved and there is no capital. Was the
fund not intended to address that, rather than the income gap to which
the hon. Member for Gloucester
referred?
Mr
Blunkett:
My hon. Friend is right—that was exactly
what we intended to do. It was a long-term policy, but one does not get
votes on long-term policies, as we found on 6 May. One gets votes on
short-termism, and we
lost.
We
will accept the regulations at our peril. The better-off, including me,
have been able to help our adult children when they reached 18 in a way
that many of our constituents are unable to, because they just do not
have the funds. I was proud to be part of a Government who attempted to
address that so that, in the long term, people would be more
self-reliant and self-assured, and would have the ability to determine
their own future and not be dependent on the state or others around
them for long-term welfare
benefits.
John
Glen (Salisbury) (Con):
The right hon. Gentleman projects
an other-world reality, where he has a small amount of money with which
to solve the problems of the world’s poorest. Does he not accept
that the reality for many of the poorest is that they reach 18 with the
prospect of going to university to rack up ridiculous debts, and little
prospect of finding sustainable employment if the macro-economic
situation is not improved? It is little solace to them to have a few
hundred pounds in their hand when they have no prospect of doing
anything with
it.
Mr
Blunkett:
It would be considerable solace to know that
their fees would be alleviated if they were on lower incomes, which is
what I introduced in 1998, and that they had several thousand pounds to
invest. They could make a choice to take out an advantageous loan on
incredibly good terms and to invest judiciously the £9,700, on
average, that they would have received to help pay it off. They would
be a great deal better off than if they did not have the money at
all.
The
nub of the issue is that young people would have had a start in life.
They would have had the kind of benefits that the better off have, and,
by definition—I come back to this point—they would have
been more self-reliant. We would have tried to reduce the asset gap,
but we would also have given people a sense of their own worth and a
sense of self-reliance and identity. In the end, we will, as a nation,
regret that we put too much emphasis on bailing people out of
disadvantage, rather than enabling them to help themselves out of it.
In other words, we should give people a hand up rather than a
hand-out.
5.26
pm
Chris
Williamson (Derby North) (Lab):
I congratulate my right
hon. Friends, who have made a cogent and well-argued case for the
introduction of the child trust fund and for its continuation. It is
regrettable that we are considering its
abolition.
Having
listened to Ministers today and in debates in the House, the more I
listen to the Con-Dem coalition, the more I fear that they are writing
a sequel to George Orwell’s “1984”, because the
amount of doublespeak that we are hearing is unbelievable. The Minister
says that the Con-Dem coalition favours encouraging people to save, yet
he is abolishing one of the most significant instruments that is
designed to so and has successfully helped people to save. That is
beyond
belief.
The
Minister opened his remarks by saying that he was sure that Opposition
Members would be disappointed—as indeed will the wider general
public—but that is an understatement. We are more outraged than
disappointed by the proposal. Trying to dress the proposal up and say
that it is part and parcel of the deficit-reduction plan will not wash,
because from where I am sitting it seems that the Con-Dem coalition is,
as I have said before, indulging in an economic vicious
circle.
As
we saw in the past—in the 1930s, 80s and 90s—the cuts
that the Government are implementing will result in job losses, which
will result in benefit payments increasing and income tax receipts
going down, which will in turn put more pressure on the Government to
introduce more cuts, which will, again, result in more job losses, more
unemployment benefit being paid, a further reduction in taxation income
and more cuts. So the vicious circle goes on. That was why we were so
intent on the need for the fiscal stimulus and the investment in the
economy to get us through this
recession.
Stephen
Williams:
The debate on the Finance Bill took place in the
main Chamber, not in this
Committee.
Chris
Williamson:
I am responding to the Minister’s
comments on the deficit-reduction plan. The Minister himself said that
this proposal was part and parcel of that plan, so I think that it is
in order for me to respond to that
point.
Richard
Graham:
Mr Crausby, will you confirm for Government
Committee members what link there is between unemployment and the
abolition of child trust
funds?
The
Chair:
It is not for me to confirm anything. I am chairing
this meeting. [Interruption.] At least, I think I
am.
Chris
Williamson:
That is one of the most irrelevant
interventions that we have heard this
afternoon.
The
child trust fund is good value for money. It costs far less than tax
breaks for people investing in pension plans, which are particularly
for the better-off in society, and far less than tax breaks for ISAs.
Furthermore, the take-up of the child trust fund is far higher than for
either of those two things. According to research done by the Child
Poverty Action Group, 40% of the population are contributing to a
pension plan and 29% have an
ISA, but 75% of all children in this country are benefiting from the
child trust fund. Why would the Government want to scrap something that
is so plainly successful, unless—as my right hon. Friends the
Members for Delyn and for Sheffield, Brightside and Hillsborough have
already said— it was down to ideology, which is the driving
force behind this
decision?
There
has been some criticism from Government Committee members about the
child trust fund, all of which is unjustified. As a direct consequence
of the introduction of child trust funds, there has been a threefold
increase in the number of people saving for their children. Not only
that, but the amount being saved by families has increased by 60%. On
either of those counts, the measure can be considered extremely
successful. My right hon. Friend the Member for Delyn has referred to
David White, the chief executive of The Children’s Mutual, but
it is worth repeating the point. David White said that this
is
“the
most successful savings initiative
ever”—
not
just one of the most successful initiatives, or a very successful one,
but the most one successful ever. That is a pretty good tribute to the
child trust funds, and another reason why it is a travesty that we are
considering scrapping them. The most important point however, which we
have touched on slightly, is the saving patterns of people on low
incomes. There has been a sea change in saving by low-income families.
To somehow pooh-pooh the fact that, as the Minister said, only 30% of
families on low
incomes—
Hon.
Members:
Thirteen.
Chris
Williamson:
Did he say 13%? The figure is actually
30%.
Richard
Graham:
Mr Crausby, may I ask for clarification? Did the
hon. Gentleman claim that the child trust funds initiative, which I
believe has some £2 billion under management, 13% of which are
savings generated by the families or their friends and the remaining
87% simply given by the Government, has been described as the
“most successful savings instrument of all time”? That is
the most extraordinary statement. It is completely
inaccurate.
Chris
Williamson:
I suggest that the hon. Gentleman take the
matter up with David White, the chief executive of The
Children’s Mutual. I did not say that, he did. I
would have thought that he was an expert on the matter, and somebody
whose opinion the hon.
Gentleman—[
Interruption.
]
The
Chair:
Order. It would make life a little easier if we
spoke one at a
time.
Chris
Williamson:
The hon. Gentleman and other Opposition
Members would do well to treat David White’s opinions with a
little more respect that they seem to be
doing.
Andrew
Griffiths:
The hon. Gentleman gives a lot of credence to
David White’s comments. How much money has David White’s
company made out of the initiative?
Chris
Williamson:
My right hon. Friend the Member for Delyn
referred to a whole list of other people in eminent positions who have
endorsed the child trust fund initiative and said how successful it has
been. We cannot argue with the facts. The facts show that 30% of
low-income families are now saving—a huge increase. Young
people, particularly those from low-income backgrounds but those from
modest-income backgrounds also, will have benefited considerably when
they get to the age of 18, as a direct consequence of the child trust
funds. The funds are particularly beneficial to children from
low-income families who would otherwise have had no dowry at 18, no
nest egg to help them get into university. People from working-class
backgrounds are often deterred from going to university because of the
cost—tuition fees and the
rest.
Some
57% of our young people still do not go to university, and child trust
funds would be extremely beneficial to them, perhaps contributing to
the cost of driving lessons to help them get into the world of work, or
as part of a deposit on a house, as my right hon. Friend the Member for
Sheffield, Brightside and Hillsborough suggested. Low-income,
working-class families in particular will be denied those opportunities
if the funds are
scrapped.
Ian
Swales:
Does the hon. Gentleman agree that child trust
funds are a scattergun policy? I am sure that the Prime Minister is
delighted that his family are about to receive one. If we really want
to help people at 18, as the right hon. Member for Sheffield,
Brightside and Hillsborough said, what will we say to those people who
reach the age of 18 over the next 13 years and do not have child trust
funds? Why has the Labour party gone against its manifesto commitments
on tuition fees, which are one of the measures that have most impacted
on people’s ability to move forward at
18?
Chris
Williamson:
I support the principle, wherever possible, of
universality. If the hon. Gentleman does not like the scattergun
approach, why is the Con-Dem coalition introducing what is effectively
another version of a scattergun approach, because they are scrapping it
for everybody? If they disagree with such an approach, as my right hon.
Friend the Member for Delyn has said, why did they not say that they
are scrapping it for the richest in society? Why did they not target
and protect the most vulnerable and poorest people in our society, who
would benefit most from this initiative? I can see that the hon.
Gentleman is nodding from a sedentary position. Does he agree with that
point?
Ian
Swales:
The link between cancelling the child trust fund
and the pupil premium—providing money for disadvantaged children
now and not in 18 years’ time—is what we believe
in.
Chris
Williamson:
My right hon. Friend the Member for Sheffield,
Brightside and Hillsborough made the point that the coalition
Government prefer to indulge in short-termism rather than long-term
strategy. A long-term strategy would have benefited considerably more
people than their policies are proposing to
do.
I
want to conclude because I think other members of the Committee want to
speak. However, I must make reference to the fact that before the
general election, all the major political parties were approached by
the
Child Poverty Action Group about signing up to the fairness impact
study. All parties signed up to it—in principle, at least. The
Liberal Democrat leader gave an unqualified thumbs-up to the fairness
impact study. He was absolutely on board with it and wished to
implement it. For members of the Committee who may not be familiar with
that study, it would subject all new policies of whichever Government
came to power to a test for its impact on inequality. It is patently
clear that the abolition of the child trust funds fails that test, and
therefore the leaders of the Con-Dem coalition parties have gone back
on a clear commitment that was given before the election to subject
their new policies to the fairness impact
study.
Finally,
my hon. Friends have made clear more eloquently than I can what a
difference the child trust fund has made. The rationale for introducing
it was extremely sound. The proposal to scrap the fund is
mean-spirited, thoughtless and incredibly
short-sighted.
5.38
pm
Mr
McCann:
When I was offered the opportunity to sit on the
Committee, I was looking forward, for the first time as a new Member,
to making a contribution to the country in which I live. I was
disappointed that at my first opportunity to make a contribution, an
important measure that affects many people in my constituency and
across the country was taken
away.
Listening
to Government Members has confused me. The Minister referred to the
removal of child trust funds as an austerity measure, while his
Back-Bench colleagues talked about value for money. There is a massive
contradiction on the Government Benches in what they are removing the
funds for. The funds have been an overwhelming success, and I have
looked at the statistics in my constituency that demonstrate that. I
have an even closer parallel to make in terms of how they have been a
success. My family is unique because my parents had five children, and
I was the second eldest. My last three siblings were all born
profoundly deaf. My younger brother has five children, who were all
born profoundly deaf. My mother and father fought and campaigned hard
for those children with a disability. I recognise that it is a
Cinderella disability because at first sight one does not know that a
person is deaf. However, the child trust fund makes a difference. I
watched my brothers and sisters growing up with a disability. When they
reached the ages of 16, 17 and 18 and were deciding what
they wanted to do with their lives, they faced far more restrictions
than an able-bodied person would have faced. They had far less
opportunities to make their mark in life.
I see the
child trust fund making a difference, not only for families on low
incomes, children who suffer from disabilities and looked-after
children, but because of the additional endowment that the previous
Government gave to children with disabilities. Although my brother is
fortunate in that child trust funds have been set up for the five
children who were born profoundly deaf, we know that in the future
those payments will be stopped and the endowment that those children
could have secured once they reached adulthood will no longer be
there.
There
is a contradiction as to whether this cut is an austerity measure and
whether the child trust funds provide good value for money, and the
coalition must also look at what it wants to achieve. I thought that
the concept behind the Conservative mantra was that saving is good and
people should be encouraged to save. Surely, if we start from a base of
zero, the type of returns that the child trust funds have secured are
outstanding. We can argue about the percentages, but whether the figure
is 10%, 20%, 30% or 40%, that is still 100%, 200%, 300% or 400% better
than what existed before, which was nothing. This is about
choices.
Stephen
Williams:
The hon. Gentleman is speaking with emotion
about his family circumstances. During the last Parliament, I worked
closely with the National Deaf Children’s Society and many other
societies that promote the interests of children with special
educational needs. The pupil premium and the Liberal Democrat policies
are specifically designed to bridge the gaps in attainment suffered by
children who come from disadvantaged backgrounds, whether that
disadvantage is due to income or some other obstacle to attainment in
schools. Through no fault of their own, the level of attainment of deaf
children in gaining five good GCSEs is among the lowest in the country.
The pupil premium is specifically designed to bridge those gaps, and
the money will be released to help pay for that pupil
premium.
Mr
McCann:
Mr Crausby, I shall defer to your opinion on what
should be debated in the Committee, but as you have probably gathered
from this rough Jock accent, I am not from England. It might interest
the hon. Member for Bristol West to know that the pupil premium will
not be available in Scotland, Wales or Northern Ireland.
Mr
George Mudie (Leeds East) (Lab):
Does my hon. Friend agree
that the distressing point about this debate is that while I fully
support the moves made to improve the chances of disadvantaged pupils
in primary schools, I do not support the principle that the money to
pay for that must come from disadvantaged children? This measure will
save £200 million, yet last night we put through a Budget
estimate figure of £555 billion without discussion after 10
o’clock. Does my hon. Friend think it outrageous that faced with
a Budget of that amount, we could not find £200 million to
contribute to primary school work without taking it from elsewhere? I
concede—as would my hon. Friend—that it might have been
better to have introduced a level below which the measure applied. I
would concede ground there and therefore we would be in agreement.
However, I find it outrageous that we are unnecessarily raiding the
child trust fund to pay for work with disadvantaged children in
schools.
Mr
McCann:
My hon. Friend will not be surprised to know that
I agree with him entirely. I do not believe that the child trust fund
and the pupil premium should be mutually exclusive. The hon. Member for
Bristol West must take that point on board and understand that the
National Deaf Children’s Society and—speaking from
experience—deaf families, do not support the measure that he
proposes. In the context of choice, we must bear in mind that it would
have been possible to put restrictions in place for the child trust
fund, rather than abolishing it in its entirety or—as we are
doing at the moment—salami slicing it until we get to the
abolition stage early in the new year.
Mr
Blunkett:
On the costings of the child trust fund, the
amount withdrawn in this year alone from area-based grant applied to
education in England exceeds the amount being saved on the child trust
fund. It amounts to a £3.5 million cut this year for
the most disadvantaged pupils in Sheffield, which is run by the Liberal
Democrats.
Mr
McCann:
My right hon. Friend makes an apposite point. It
all comes back to the question of choice. I believe that the options
available to the Government were wide-ranging and varied. There were
many options, starting from either end of the
spectrum.
Ben
Gummer:
This is a welcome breath of realism from the
Opposition; they are at least conceding that choices must be made.
However, on the other points made, where was the amendment last night
to find £200 million elsewhere in the Budget? There
was none. The Opposition have made no positive suggestions. It would be
good to hear them now. What would the hon. Gentleman sacrifice
instead?
Mr
Mudie:
Will the hon. Gentleman give
way?
The
Chair:
Mr Mudie, you know that you cannot intervene on an
intervention.
Mr
McCann:
Give me 30 seconds to answer the hon.
Gentleman’s point, and I will give way. I will answer it
directly. We had an austerity plan in case of our re-election. However,
should Government Members find the situation too tough and prefer us to
handle it, we will be happy to take it on board at any
stage.
Mr
Mudie:
The answer to the hon. Member for Ipswich is
twofold. First, we wanted to discuss the estimates last night, but we
were ruled out of order by the Speaker under Standing Order No. 55, so
we could not discuss them, nor could any other Member. The figure of
£555 million went through after 10 o’clock last night,
and we were forbidden to speak about it. We would love to table an
amendment to the regulations—it might even have the hon.
Gentleman’s support—but the silly system for statutory
instruments means that they are not
amendable.
The
Chair:
Order. Mr Mudie, you will have to end your
intervention. Mr McCann, can you draw your conclusions on the clause? I
must give Mr Hoban the opportunity to
respond.
Mr
McCann:
I will, Mr Crausby. I did not intend my
contribution to be emotional, only to give evidence of what I witnessed
at first hand in my own family. It is important to be able to bring
experiences from outside the House into these Chambers so that people
can hear about them. It is about choices. Government Members have made
choices. They have chosen to be unnecessarily austere and not to
support hard-working families, looked-after children, disabled children
or families on low incomes. For all those reasons, this is a shameful
piece of work, and I will vote against
it.
5.48
pm
Mr
Hoban:
It has been an interesting debate. I am not
entirely sure that all the comments made by Opposition Members have
been rooted in fact. A lot of suppositions have been made about the
policy’s effectiveness; I will deal with them in a
moment.
Let me be
clear about the challenge made by the right hon. Member for Delyn
regarding the policies on which both coalition parties stood during the
general election. He referred to my words on the statutory instrument
earlier this year when the increase for disabled children was passed.
Our manifesto commitment in April said that we
would
“cut
government contributions to child trust funds for all but the poorest
third of families and families with disabled
children”.
Nothing that we did
then was inconsistent with the manifesto.
My hon.
Friends from the Liberal Democrat party took a more robust view of
child trust funds, but the coalition agreement has been clear that we
believe that the programme must be cut, because difficult choices need
to be made about how we balance the books. Opposition Members have
talked about their austerity plan, but none of us have seen it. In the
eight weeks since the House returned after the general election, we
have had Budget and Finance Bill debates, and the austerity plan has
been mentioned, but we have not heard a single shred of detail about
it. I take the comments about how Labour would saved in different ways
with a pinch of salt, because we do not know what those different ways
are.
Let me deal
with some of the issues that were raised, before returning to the
principle behind the measure. The right hon. Member for Delyn asked
what discussions we had had with providers and whether we could provide
some certainty about what would happen to the plans in the future. I
shall meet providers later this week to talk about how to take that
forward.
The
right hon. Member for Sheffield, Brightside and Hillsborough talked
about the Thoresen review. I point out to him that it was the
Conservative party that first agreed to implement Otto
Thoresen’s proposal for a national money guidance scheme. We
made that commitment earlier than the previous Government did and, as I
said earlier, we announced last week the roll-out of an annual
financial health check to help families to think about their
finances—both savings and
debt.
I
point out to the hon. Member for East Kilbride, Strathaven and
Lesmahagow that, as I said earlier, the additional payments that we
would have made to disabled children will be used from 2011-12 to
provide additional respite breaks. That will allow upwards of 8,000
week-long breaks a
year.
The
right hon. Member for Delyn asked what would happen to the
contributions made by the Welsh Assembly. That is a devolved matter. It
is the Assembly’s choice whether it continues to make those
contributions, and departmental officials have been in contact with
Welsh Assembly officials to discuss
that.
The
issue that Opposition Members raised was how effective the policy has
been in increasing savings. There is no robust evidence to support
their conclusions that there has been an increase in savings. The hon.
Member
for East Kilbride, Strathaven and Lesmahagow said that we had gone from
zero to something, but his right hon. Friend the Member for Delyn cited
statistics from the Children’s Mutual showing that the
contributions had gone up from £15 to £24 a month, so
clearly we were not starting from a zero base. It is not clear what
impact the child trust fund has had in terms of increasing savings, but
let me give some figures that will help hon.
Members.
All
children are entitled to have a child trust fund. If parents do not use
the vouchers, a child trust fund is opened on their behalf; 74% of
children have had an account opened. About 24% of families contribute
to their children’s child trust fund, but only 13% of families
on low incomes contribute to their children’s child trust fund.
Those are the statistics that we
have.
We
can compare the figures with those for ISAs, to which the hon. Member
for Derby North referred. One third of adults have an ISA. There are
more than 20 million ISAs in existence, and 14 million
people contribute to ISAs every year. Children are not able to open
ISAs, but one can be opened on their behalf. People are still able to
continue to save either in child trust funds or in the other savings
vehicles available. In contrast to the number of ISAs, 5.25 million
child trust funds are in existence, so by far the biggest savings
product is still the ISA. The savings rates are not as high as hon.
Members suggested. Between 13 and 24% of all families and about 13% of
families on low incomes contribute to their children’s child
trust
funds.
Chris
Williamson:
Has the Minister any figures for the number of
families on low incomes who have opened an ISA? As the Minister
concedes, every child who is born has a child trust fund opened on
their behalf if one is not opened by their
parents.
Mr
Hoban:
I do not know whether any analysis has been done of
the social groups that have opened ISAs, but one argument advanced in
support of child trust funds, to which the right hon. Member for
Sheffield, Brightside and Hillsborough referred, was increased savings
among families on lower incomes, so clearly a lot of work has been done
to examine that
area.
The
right hon. Gentleman talked about his aspiration for how the funds
would build up over time. With regard to the differential contribution
rates between average families and families on low incomes, it appears
that a child in an average family would accumulate in their child trust
fund about £4,700 and that the figure for a family on a low
income is about £3,600. There is a difference in that respect. I
just do not think that the case is proven that child trust funds have
been as effective as people would like in boosting savings and creating
a savings culture among
families.
That
said, today’s argument is not about the merits of the child
trust fund. It is about whether we can afford it. We are talking about
£500 million a year. The choice that the Government face is
this: if we keep the child trust fund, where do we cut spending? There
were no ideas from Opposition Members about where those cuts should be.
Do we increase borrowing? We know that actually we need to reduce
borrowing to keep interest rates lower for longer. The Opposition have
no ideas about whether to increase taxes to pay for the cost
of child trust funds. I put it to them that if we are to tackle the
deficit, we need to make difficult decisions. They are not
straightforward, but we have to face up to the choices we
have.
I
am afraid that the coalition Government are prepared to face up to
those choices: I do not see any sign that the hon. Member for Hemsworth
is prepared to make those difficult choices. As the former PPS to the
former Prime Minister, he knows just how afraid the last Government
were to make those choices, but I will happily take his
intervention.
Jon
Trickett:
We were perfectly happy to make very difficult
decisions and I am proud of the role that I played in Government with
the then Prime Minister.
The Finance
Bill now going through gives the power to assist the richest 300,000
people in the country to the value of £3.6 billion on pensions
relief. It would be simple: £3.6 billion to the richest 300,000
income earners in the country, as opposed to less than £200
million to help the poorest children. That is the choice they are
making.
Mr
Hoban:
There are two misunderstandings in the hon.
Gentleman’s speech. First, the full-year cost of scrapping the
child trust fund is £500 million, not £200
million. Secondly, in respect of the Finance Bill provisions regarding
tax relief on pensions, if the hon. Gentleman had read the Red Book, he
would have seen that there are proposals to replace that, so that the
reduction in tax relief is safeguarded under an alternative regime. I
am afraid that he misunderstands the point.
The
Government are prepared to make difficult decisions to safeguard the
recovery, to tackle the legacy of the previous Government. These are
not straightforward decisions to make, but I believe this is the right
decision in the long-term interests of families in this country, who
know that the Government want to see interest rates remain lower and
the economic recovery starting, so that there will be more
opportunities for young people in the future. I commend this measure to
the
Committee.
Question
put.
The
Committee divided: Ayes 10, Noes
7.
Division
No.
1
]
AYES
Glen,
John
Goldsmith,
Zac
Goodwill,
Mr
Robert
Graham,
Richard
Griffiths,
Andrew
Gummer,
Ben
Hands,
Greg
Hoban,
Mr
Mark
Swales,
Ian
Williams,
Stephen
NOES
Blunkett,
rh Mr
David
Hanson,
rh Mr
David
McCann,
Mr
Michael
Mudie,
Mr
George
Paisley,
Ian
Trickett,
Jon
Williamson,
Chris
Question
accordingly agreed to.
Resolved,
That
the Committee has considered the draft Child Trust Funds (Amendment No.
3) Regulations
2010.
5.59
pm
Committee
rose.