Session 2010-11
Publications on the internet
Savings Accounts and Health in Pregnancy Grant Bill

Savings Accounts and Health in Pregnancy Grant Bill

The Committee consisted of the following Members:

Chairs: Mr George Howarth  , Mr Gary Streeter 

Baldwin, Harriett (West Worcestershire) (Con) 

Brown, Lyn (West Ham) (Lab) 

Bruce, Fiona (Congleton) (Con) 

Fovargue, Yvonne (Makerfield) (Lab) 

Gilmore, Sheila (Edinburgh East) (Lab) 

Goodwill, Mr Robert (Scarborough and Whitby) (Con) 

Green, Kate (Stretford and Urmston) (Lab) 

Hanson, Mr David (Delyn) (Lab) 

Hemming, John (Birmingham, Yardley) (LD) 

Hoban, Mr Mark (Financial Secretary to the Treasury)  

McCarthy, Kerry (Bristol East) (Lab) 

McGovern, Alison (Wirral South) (Lab) 

Maynard, Paul (Blackpool North and Cleveleys) (Con) 

Newton, Sarah (Truro and Falmouth) (Con) 

Perry, Claire (Devizes) (Con) 

Ritchie, Ms Margaret (South Down) (SDLP) 

Sharma, Alok (Reading West) (Con) 

Williams, Stephen (Bristol West) (LD) 

Sarah Davies, Sarah Thatcher, Committee Clerks

† attended the Committee

Column number: 201 

Public Bill Committee 

Tuesday 9 November 2010  


[Mr George Howarth in the Chair] 

Savings Accounts and Health in Pregnancy Grant Bill

Clause 1 

Removal of eligibility for child trust fund 

Amendment moved (this day): 23, in clause 1, page 2, line 8, at end add— 

‘(5) The provisions of this section shall not apply until formal consultation has been undertaken with the Welsh Assembly Government, Scottish Parliament and Northern Ireland Executive.’.—(Mr Hanson.)

4 pm 

Mr David Hanson (Delyn) (Lab):  I welcome you back to the Chair, Mr Howarth. 

Before the break we were discussing amendment 23, which provides that formal consultation be undertaken with the Welsh Assembly Government, the Scottish Parliament and the Northern Ireland Executive before the implementation of clause 1. I indicated why I felt it important to discuss the matter with the National Assembly for Wales, which will contribute an additional top-up to the child trust fund of some £50 in 2010-11 for children who were born in the defined period, have a trust fund account and are resident in Wales on a given date. There is a further top-up of £100 for children who are claiming free school meals, or are in receipt of child tax credit or other benefits, which I listed. 

Focusing on the National Assembly for Wales, it is important to ask the Minister what formal consultation has taken place, not just at official level, but at ministerial level. Several issues bear consideration in relation to the impact on the National Assembly of clause 1, not least of which is the impact on its continuing to contribute the £50 and £100 to child trust funds after 3 January 2011. 

I refer the Minister to the proceedings of the National Assembly for Wales on 16 June 2010, when Jane Hutt, who is the Minister for Business and Budget in Wales indicated her concern that the reduction and stopping of all Government contributions to child trust funds would have a dramatic effect. In the Record from that date, she stated: 

“That will affect around 32,000 children in Wales annually, who will miss out on a child trust fund account altogether, as well as at least 135,000 children who will now not receive the additional UK Government contribution at the age of seven. The greatest effect will be felt by those who are already living in relative poverty.” 

Her contribution leads me to believe that the National Assembly for Wales wishes the child trust fund to continue, because it is contributing, and the fund is a valuable asset in Wales that is helping to achieve the

Column number: 202 
poverty target there. Has the Financial Secretary had any formal discussions with the Minister in the Assembly? If so, it might help the debate if he let me know so that we can decide whether to continue discussing such matters. 

The Financial Secretary to the Treasury (Mr Mark Hoban):  We have. 

Mr Hanson:  With the Minister? 

Mr Hoban:  We have had discussions with both the Minister and her officials in Wales and it is clear that the Welsh Assembly Government can continue to make payments into child trust funds for some time to come, because they make such payments at school age. It will also be open to the Welsh Assembly Government to continue to make payments into the junior ISA if they choose to do so. 

Mr Hanson:  I am grateful to the Financial Secretary. Those contributions will help. I do not know whether the consultations were formal and whether there has been a formal decision from the Assembly. The Financial Secretary has mentioned the junior ISA, but as yet, even Committee members do not know what its final format will be, which is why the amendment is drafted as it is. The provisions under clause 1 will come into effect on 3 January 2011. The National Assembly for Wales does not yet know—neither do we—the position with regard to the junior ISA. 

I am asking not that the Minister stops his policy objective, but that before he implements the provisions in clause 1, there should be formal consultation with the Welsh Assembly, Scottish Parliament and Northern Ireland Executive. That seems perfectly fair because, for example, when the junior ISA is finally developed, it might be something that they wish to have a view on; I will elaborate in a moment. It seems to me that the Minister could continue the provisions of the child trust fund for eight, nine or 10 months until the junior ISA is in place, so that the Welsh Assembly, Scottish Parliament and Northern Ireland Executive can have a view on that and other matters. 

Let me explain why, with the junior ISA. I have figures about the take-up of the current child trust fund with the National Assembly for Wales, the Scottish Parliament and the Northern Ireland Executive, which I will try to share with the Committee. I will compare them with a random borough and constituency, say Fareham, where there is an 83.5% take-up of the child trust fund before the automatic trigger comes into play and the state opens the trust fund for individuals. In none of the constituencies or boroughs in Wales, Scotland or Northern Ireland does take-up occur at anywhere near that level. It is 70.2% in Aberdeen, 78% in Aberdeenshire, 75% in Angus, 69.5% in Clackmannan and 67% in East Ayrshire. In Wales, it is 67.8% in Blaenau Gwent, 74.4% in my own area in Flintshire, and 80.5% in Powys, which is relatively high, but still not as high as in the Minister’s constituency. In Northern Ireland, the figure is 68.3% in Ards, and 54.8% in Antrim, which is a very low figure; it is 58% in Strabane, and around 68.8% in Down, in the area of my hon. Friend the Member for South Down. I could give all the figures if I wanted to filibuster, but I do not. 

The Chair:  Good. [ Laughter. ]  

Column number: 203 

Mr Hanson:  If the hon. Member for Devizes wants me to read out the figures for all the areas in Scotland, Wales and Northern Ireland, I am happy to do so. Who knows? I may yet do so. 

I am simply making the point that if there is an 83.5% take-up in Fareham of the child trust fund opened by parents, compared with a figure as low as 54% in Strabane or Ards in Northern Ireland, or the lower figures in Wales, it may be interpreted in a number of ways, but it tells me that the chances of a junior ISA being opened and parents choosing to contribute to it would be higher in Fareham than they would be in Wales, Scotland or Northern Ireland. It would be worth while for the Minister, before he implements the legislation, formally to ask for the views of the Executives in Scotland, Northern Ireland and Wales about the figures and how we can make the junior ISA work better. If it is the case that clause 1 ends the child trust fund, I want the junior ISA to become a success and parents to try to contribute to it. If there is low take-up by parents of the current child trust fund—although there is 100% take-up, there is still low initial take-up by parents in opening the accounts in some areas—and in every county, constituency and borough in Scotland, Northern Ireland and Wales, it is lower than it is in Fareham, I want to see how we can generate take-up and ensure that we do that. The partners in the Executives of all three devolved Administrations will be keen to do that. 

On the issues raised by the Minister regarding the pupil premium, there is an important point about how it is implemented in Scotland, Wales and Northern Ireland; we touched on it briefly before lunch. The Minister has made great play of the fact that the pupil premium exists and is a substitute for action on the poorest third of children in our community. I am pleased that my hon. Friend the Member for South Down, the leader of the Social Democratic and Labour party, is in the Committee today. She will know that the pupil premium does not operate in Northern Ireland. My hon. Friend the Member for Edinburgh East will tell me that it does not operate in Scotland, and I can confirm that it does not operate in Wales. 

Mr Hoban:  Will the right hon. Gentleman give way? 

Mr Hanson:  I will show the Financial Secretary the courtesy of giving way in a moment, when I have finished this point. 

The pupil premium does not operate in those three areas. There will be a Barnett consequential, which is probably the point the Financial Secretary wants to make. Would it not be useful, therefore, if there were full and frank discussions with the three devolved Administrations on the use of that Barnett consequential, and on whether, if a pupil premium had been in place before he cancelled the child trust fund—as he is doing for England—the loss for the poorest third of children might have been replaced through the pupil premium? 

Mr Hoban:  As the right hon. Gentleman knows, the Barnett consequentials have been where education spending in England has increased, and that increase has flowed through in the settlement for Northern Ireland, Scotland and Wales. I would not presume to tell Ministers in Belfast, Edinburgh or Cardiff how to spend that money,

Column number: 204 
and I am sure the hon. Member for South Down would not want me to do that. It is a devolved matter and it is for the devolved Administrations to decide how to spend the money; it is not for English Ministers to dictate that. That reflects the reality of the devolution settlement. 

Mr Hanson:  I would not expect the Financial Secretary to tell individual Ministers in each of the devolved Administrations how to spend the money. However, it is incumbent on him, before he abolishes the child trust fund, to know what they will do with that resource and whether they will use it. He should know whether the pupil premium will be in place in, say, the constituency of Wirral South, which I can see from my bedroom window a mile across the River Dee, but not in place in my constituency of Delyn, which is directly opposite. My hon. Friend the Member for Wirral South might have a pupil premium and I might not, but the Financial Secretary will abolish the child trust fund based on his belief that the pupil premium offers salvation for all. 

I simply say to the Financial Secretary that the amendment would give him an opportunity to discuss in detail with Scotland, Wales and Northern Ireland those and other issues, such as the implementation of the junior ISA, and disability questions, which are largely devolved matters in the three areas. He would be able to have discussions with the Administrations before he abolishes the child trust fund. Whatever discussions he has had, a range of issues have been thrown up by this debate alone, so there needs to be further discussion. I would say, if I may be so honest, that if he gets his clause and abolishes the child trust fund, by all means let him do it, but let it be at a time when he has formally discussed the implications of that abolition with all the devolved Administrations. 

This morning, the Financial Secretary said that he believes local authorities could contribute to the junior ISA for looked-after children. I recall that local government is devolved in Northern Ireland, Scotland and Wales, so it is important that he discusses with Ministers for local government in Northern Ireland, Scotland and Wales what the impact would be of local councils’ donating resources to looked-after children. I do not know if he has done that to date; he may want to tell the Committee whether he has met the three local government Ministers to discuss that issue, or whether he has had representations from them. He raised those issues this morning, and I think he should discuss them with the three devolved Administrations. 

I make the same point in relation to tackling child poverty in Scotland, on which my hon. Friend the Member for Edinburgh East may wish to comment. There are proposals before the Scottish Executive to produce by April 2011 the Scottish implementation plan and strategy for the Scottish response to the UK Child Poverty Act 2010. That Act created statutory responsibilities for England, Scotland and Northern Ireland to meet targets to tackle poverty and the 2020 goal of eradicating child poverty. My hon. Friends and I, and indeed, the witnesses, believe that the abolition of the child trust fund will increase inequalities in our society. Has Financial Secretary discussed the 2010 Act with Scotland, Wales and Northern Ireland, and will the abolition of the fund make harder their task of eradicating child poverty in the three devolved regions? 

Column number: 205 

There are many areas of extreme poverty in England, and my hon. Friends represent some of them. Having been a Northern Ireland Minister for two years, I know that it has areas of extreme poverty. I can go to parts of Belfast West, Foyle, Strabane, and Belfast North and parts of the constituency of my hon. Friend the Member for South Down and see poverty that is greater than in England. The Minister could accompany me to the south Wales valleys to see the poverty that exists there and the challenges that people face. There are different extremes of poverty in Scotland, Wales and Northern Ireland. I accept that places such as West Ham and your constituency of Knowsley, Mr Howarth, have areas of extreme poverty. However, I contend that the level of poverty is proportionally higher in Scotland, Wales and Northern Ireland. The Minister has a duty to consider the implications of abolition on looked-after children, the poorest third, disabled children and others in each of the devolved Administration areas. 

4.15 pm 

Has the Minister met Nicola Sturgeon, the Scottish nationalist Deputy First Minister who has a responsibility for child poverty in Scotland? Has he had representations from the Scottish Executive on these issues? Will he, prior to the abolition of the child trust fund, discuss the issues with her? Has he met Alex Attwood, the Member of the Legislative Assembly who has taken over from my hon. Friend the Member for South Down? She was previously a Minister in the Department for Social Development, which has devolved responsibility for the child benefit system, child support, housing and other issues, all of which will feel the impact of child trust fund abolition and the wider poverty issues. That is worth discussing. Indeed, I have before me information dated 3 November. I looked up whether Alex Attwood had formally met the Minister—I googled that this very day. The answer was no, he had not, but he had met the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling) to discuss the impact on employment. If Mr Attwood had met the Minister, he would have put something out, as he did about his meeting with the right hon. Member for Epsom and Ewell. I wonder whether Mr Attwood has met the Financial Secretary to discuss these issues. My hon. Friend the Member for South Down indicates that he has not. In the evidence, it was very clear that some of the issues in the Bill—not just the clause that we are debating—are extremely important in Northern Ireland, and I hope that the Minister will look at all those issues in detail. 

Finally, the amendment is important because the Welsh Assembly has budgeted for allocating this resource in addition to the child trust fund. It did so in good faith. It believed the Minister’s manifesto commitment before the election. The Northern Ireland Assembly and the Scottish Parliament would also have believed that manifesto commitment. On 6 October 2009, the Chancellor of the Exchequer said in a speech that is on the Conservative party website: 

“child trust funds have not been as successful as many like myself hoped.” 


“We should continue paying them to the poorest families who often have no savings, and encourage them to use them more”. 

Column number: 206 

That was a speech given by the Chancellor of the Exchequer, the right hon. Member for Tatton (Mr Osborne) before the election. 

There has been long-term planning for child trust funds not only by the Treasury but by the Welsh Assembly Government, who invested time and money in developing a scheme, and by the Northern Ireland Executive and the Scottish Parliament, which have targets to reduce poverty. Frankly, the Minister should formally consult them before implementation, given all the things that we have said today on the new ISAs, disability and looked-after children. I want to ensure that all those issues are sorted out between the three devolved Administrations, who have a key role in helping to meet child poverty targets, and who will have a key view on whether the child trust fund abolition will help meet them. What type of discussions has the Minister had with the devolved Administrations? What was the quality of those discussions, and what feedback has he received? Does he intend to discuss with them the matters that he has considered since meeting them, such as child ISAs, disability living allowance and looked-after children, before implementation? 

Although he will not drop the proposals completely, will the Minister accept the amendment to ensure that there is formal consultation before they are implemented? That would perhaps buy a few months in which the issues that we have discussed today might be teased out. 

Ms Margaret Ritchie (South Down) (SDLP):  I strongly support my right hon. Friend’s amendment. As the Member for South Down and a former Minister for Social Development in Northern Ireland with direct responsibility for the social welfare and benefits system, I am well aware of the levels of deprivation, as is my right hon. Friend, who is a former Minister at the Northern Ireland Office. 

There are 36 neighbourhood renewal areas in Northern Ireland, which are defined by the Noble statistics on deprivation. Over the past few years, we have tried to alleviate poverty in Northern Ireland by directing funding to those areas on a cross-departmental basis. I am led to believe that the Northern Ireland Executive, of whom I used to be a member, were not consulted about the abolition of child trust funds. There is considerable concern given that it is an area with high levels of deprivation. Was the Northern Ireland Commissioner for Children and Young People consulted about the legislation? That post is dedicated to addressing the needs of children. 

It is interesting that children’s funds were established in the first mandate of the Northern Ireland Executive and the Northern Ireland Assembly. You, Mr Howarth, and my right hon. Friend the Member for Delyn might be particularly aware of that, because the previous Administration abolished them. There was a clear need for them at that stage. 

The evidence of deprivation is still apparent. My successor in the Department for Social Development is discussing with Lord Freud the areas of flexibility in social security legislation. Although we recognise the issue of parity, it is possible to exercise flexibility to take account of special circumstances, such as poverty and the particular needs of rural areas, perhaps relating to inaccessibility. 

Column number: 207 

Consultation is vital in taking account of the more acute levels of poverty. It is also important to address the particular needs of a region that is coming out of conflict. We are dealing with a legacy of nigh on 40 years of conflict and violence. The levels of deprivation are higher in areas of conflict. My right hon. Friend highlighted areas where the dependence on free school meals, benefits and other measures associated with poverty is much greater. There is a need for consultation with the Northern Ireland Executive, who are trying to address not only the levels of poverty, but the legacy of conflict. There is a need to underpin the new devolutionary measures in Northern Ireland and the new institutions of Government. One way to do that is to undertake the necessary consultation on the abolition of the child trust fund, and on the Government’s proposals to replace it. I therefore support the amendment. 

Sheila Gilmore (Edinburgh East) (Lab):  The Financial Secretary’s intervention demonstrated what is going wrong with the relationship between the current Government and the devolved Administrations. It is not as simple as saying, “We should not tell them or dictate to them what they do.” We are not yet in a federal constitution set-up, but we are also not in one where it can be said that, because we have devolution, we have no interest in what they do. That would be wholly appropriate if there were independence, but neither I nor Government Members support that. 

We have an interweaving of our financial affairs in particular. The Scottish Parliament, until such time as any further political powers are devolved, which may happen in the future—I understand that the Government are committed to implementing the recommendations of the Calman report—receives a set amount of money from Westminster. Changes that are made in Westminster directly affect what is happening in Scotland. Yes, the Scottish Government have the ability to decide within that overall package how it is split up, but the fundamental decision on that total amount is very important. 

As important as that total funding package is the impact of changes in provisions, which in this case come from the Treasury, but in other cases will come from the Department for Work and Pensions. What happens here will have an impact. The Scottish Government may take a different view, as other devolved Administrations have, of how they want to set about dealing with child poverty, but it is important first to have advanced notice of what may be happening, to be able to plan and to have consultation. That is not taking place, which is regrettable. 

If the Government are committed to retaining the Union, and do not want to see further pressure from Scotland for independence, they are going absolutely the wrong way about it. We heard a lot about the respect agenda for the devolved Administrations initially, but in measure after measure we find that there has been little consultation and opportunity for those Administrations to come forward and say, “That doesn’t work, here is our other proposal”, or, “What can we work out to make this work better for us.” It has not taken place here and it does not take place in other measures. We are treading dangerous political ground if we keep that up. 

Given that there are implications, it may be that the Barnett consequentials of increased spending, which may come through in the pupil premium in England,

Column number: 208 
will affect Scotland. That may be the case, although I understand that overall the pupil premium is likely to be a substitute for other elements of education spending in England, in which case there will be no Barnett consequential. That is what we need to know and that is exactly what the Scottish Parliament needs to know. In that respect, I urge the Minister to accept the amendment. 

4.30 pm 

Mr Hoban:  It is a pleasure to serve under your chairmanship, Mr Howarth. Let us be clear about the measures in front of us today and their relationship to the devolution settlement. The balance of the UK Government’s and the devolved Administrations’ roles and responsibilities is clearly set out in the devolution settlement. Child trust funds are a reserved UK-wide matter and therefore lie within the competence of Parliament. Given that, a formal consultation process with the devolved Administrations would not be appropriate. I do not believe that a requirement for that should be set out in legislation. As I said in an intervention on the right hon. Member for Delyn, the Welsh Assembly Government have been in contact with me about the abolition of the child trust fund, but neither the Northern Ireland Executive nor the Scottish Government have been. 

We will continue to work with the devolved Administrations to ensure that they are aware of the Government’s plans, including how they might impact on individual Administrations’ current practices. My officials are happy to talk to their counterparts about it, and they have been in contact with the Welsh Assembly Government in particular. That Government will be the most directly affected devolved Administration because, unlike the Scottish Government or the Northern Ireland Executive, they make payment into CTFs for children living in Wales. What happens with those payments is entirely a matter for the Welsh Assembly Government. As I have said, they are currently made to Welsh children entering primary school and they will continue to be made for several years. It will be possible for the Welsh Assembly Government to make payments into junior ISAs. 

Let me deal with whether CTF abolition will make child poverty targets harder to meet. That matter has cropped up a couple of times in our discussions. The reality is that, because child poverty targets are measured on household income, CTFs fall outside that calculation. They are deemed to be locked up until a child is 18 and are therefore not part of the calculation of child poverty. As I have said several times, delaying the end of eligibility for child trust funds would mean additional costs of up to £20 million a year if eligibility were to continue until April 2011, for example. If we accept the amendment, we would delay the date of abolition. That would not be a good use of taxpayers’ funds, particularly given that it is a United Kingdom matter not a matter for devolved Administrations. If the right hon. Gentleman chooses to press the amendment to a Division, I will ask my hon. Friends to oppose it. 

Mr Hanson:  That was short and sweet. I thank the Minister. Our discussions are greatly appreciated, but I do not accept his assessment. I fully accept that we are debating a non-devolved matter. As a Member of this House, I want clarity about what is a UK-reserved

Column number: 209 
matter and what are devolved matters for the Welsh Assembly Government, the Scottish Parliament and the Northern Ireland Executive. I drafted the amendments in such a way because the devolved Administration in Wales have made a commitment to fund additional payments to the child trust fund for the future. I am still not clear about matters. I might be at fault, but perhaps the Minister can clarify whether the Welsh Assembly Government could set up a fund for children born post-3 January 2011. I suspect that, under clause 1, they could not. 

Mr Hoban:  To be clear again and as I said in my remarks, the Welsh Assembly Government could continue to put money into junior ISAs for children in Wales. I said that in the context of local authorities, and the children in their care. The same applies to the Welsh Assembly Government. Third parties will be able to contribute to children’s ISAs so that children born after 3 January 2011 who live in Wales could, if the Welsh Assembly Government chose to spend their money in that way, receive a contribution from them into their junior ISA. 

Mr Hanson:  I am grateful to the Minister. I understood the junior ISA point. All I wanted to know was whether, if the child trust fund is abolished from 3 January as is set out in clause 1, there was still scope for the Welsh Assembly Government to contribute money to a new child trust fund. The only option for the Welsh Assembly Government to consider as part of their budget considerations is whether they wish to put money into a junior ISA—a tax-free saving vehicle for those who happen to pay tax. It would not be a universal payment, as the child trust fund payment is. The Welsh Assembly Government will have to consider and examine whether they wish to continue their contribution, based on the revised discussions. 

I do not want to be repetitive, because we can fill our discussion time until 4 o’clock on Thursday without my needing to repeat myself, but we do not yet know the form of the new ISA. The Minister has not yet been able to come to us today and say, “This is what the new junior ISA looks like, this is what we have consulted on, this is its final form, this is the capped level, this is how contributions are made.” There are a whole range of issues that we do not yet know. According to the Minister’s own press release, which we discussed in an earlier sitting, the junior ISA, which is to replace the child trust fund, will not be in place probably until October next year, although admittedly it will be backdated to 3 January. 

The Minister is asking the Welsh Assembly Government to take budgetary decisions in two weeks’ time on whether they wish to continue a £50 or £100 contribution without formal consultation, without knowing what the junior ISA is or how the backdating mechanism will work, and without their having yet decided whether they wish to continue that funding at a time when they are losing £1 billion because of the comprehensive spending review settlement. The Minister argues that, to compensate for poverty, the pupil premium will be put in place, yet the Welsh Assembly Government are already losing £1 billion of resources from the

Column number: 210 
Conservative-Liberal Democrat Government as part of the comprehensive spending review settlement. Those are unknowns on which the Welsh Assembly need to be consulted. 

My hon. Friend the Member for South Down has made valid points about the levels of poverty in the north of Ireland. There are real levels of poverty in Northern Ireland. That is in addition to the higher levels of poverty that we have in other parts of the United Kingdom, for the very reasons she mentioned. I was a Northern Ireland Office Minister for two years, and I would meet people who were the children and grandchildren of poverty. They were poverty-linked because of the difficulties with the troubles in the late ’60s and early ’70s. There was inter-religious and inter-community violence for many years, which has added to the poverty and the lack of investment in the area. The child trust fund, as a cross-community and cross-religion asset-building base, would have been particularly valuable in helping people when they reached the age of 18. 

Again, I would not expect the Minister to spend the Northern Ireland Executive’s resource on their behalf, but I would expect him to discuss with them their challenging issues of poverty and what role the child trust fund played in that regard. A similar argument applies for Scotland. I am afraid that I am not happy with the Minister’s response. We need formal consultation and, in the interests of ensuring that the devolved Administrations get that, I would like to press the amendment to a Division. 

Question put, That the amendment be made. 

The Committee divided: Ayes 8, Noes 10. 

Division No. 7 ]  


Brown, Lyn   

Fovargue, Yvonne   

Gilmore, Sheila   

Green, Kate   

Hanson, rh Mr David   

McCarthy, Kerry   

McGovern, Alison   

Ritchie, Ms Margaret   


Baldwin, Harriett   

Bruce, Fiona   

Goodwill, Mr Robert   

Hemming, John   

Hoban, Mr Mark   

Maynard, Paul   

Newton, Sarah   

Perry, Claire   

Sharma, Alok   

Williams, Stephen   

Question accordingly negatived.  

Mr Hanson:  I beg to move amendment 25, in clause 1, page 2, line 8, at end add— 

‘(5) The Treasury shall undertake by 3 January 2012 a formal review of section 1 of the Savings Accounts and Health in Pregnancy Grant Bill and the Child Trust Funds (Amendment No. 3) Regulations 2010.’.

I hope that the amendment, which I have moved to secure discussion of the issues, can be accepted by the Minister. Again, it may not be perfectly formed, and he may want to talk about the way in which we have crafted it, but surely the principle is right. We are not denying the Minister any legislative competencies under the order that we agreed on, I think, 20 July—that order reduced the payments for the child trust fund. We are not asking him to not abolish the child trust fund under clause 1. What we are asking him to do through the

Column number: 211 
amendment is simply look in 12 months’ time at what the implications are, and produce a report for the House and the public at large on how well it is all going, as I am sure it will be going very well at that particular point in time. 

The starting point for the amendment is that we are looking at the situation from 3 January 2011. Let me remind the Committee of what that will be. All Government contributions to child trust funds will have ended. The eligibility of children born after that date will have been scrapped. That means that there will be no £50 for every child—or no £250 before the Child Trust Funds (Amendment No. 3) Regulations 2010—no £50 top-up for the poorest, no top-up for disabled people, and no additional payments for children in care. It means none of the payments for seven-year-olds that were put in place before the regulations, and it potentially means that we will have a new child ISA in place at some point in 2011, but on what date we do not yet know. It also means that current providers will have provided, for 12 months, a child trust fund for people who were eligible before the abolition, and will be looking at how that impacts them in 2011. 

The amendment does not seek in any way, shape or form to negate the frankly appalling impacts of the Bill, and of the regulations in July. All it seeks to do is ask the Minister, “Please, by 3 January 2011—one year away—will you bring to the public domain an assessment of how it is all going?” I hope that he can do that on a regular basis, post-2012. We have rehearsed the arguments here in much detail, but there are several points that I think we need to look at, and we need to look at the impact of the policies 12 months on—perhaps even five years on and beyond, but certainly, in principle, 12 months on. 

The first point is: what will be the impact on the savings ratio, which the child trust fund has been so successful, in my view, in improving to date? We have seen incontrovertible evidence during the course of the debate that the level of saving has risen because of the child trust fund, which is focused on children. I would like to know whether, in the 12 months after the abolition of the child trust fund and the contributions, the savings ratio goes up or down, whether it stays the same or changes, and whether the parents of the poorest children in our communities are saving less, the same amount, or more. I would like to know whether payments, either at the higher level or the lower level, have been a major kick-start and a generator of contributions—that is the case we made in Committee. It would be useful to know, 12 months after the abolition of the child trust fund, whether saving has tailed off. I would like to know that, but not in order to beat the Minister over the head with it. I hope that whatever succeeds the child trust fund, hard though we are fighting to save it, has a useful function, is worth while, and meets the objectives that we in Committee seek—the objectives of raising savings and dealing with some of the most challenging people in our community. 

Kate Green (Stretford and Urmston) (Lab):  Does my right hon. Friend agree that such a review should not simply look at the savings ratio in the year ending March 2012, but should compare back over perhaps a period of five years, in light of the point made by my hon. Friend the Member for Wirral South this morning?

Column number: 212 
We have had a couple of untypical years in the economy, which means that we need a history of savings ratios to be able to make a meaningful comparison with more stable times. 

4.45 pm 

Mr Hanson:  My hon. Friend makes a valid point. Echoing what my hon. Friend the Member for Wirral South said this morning, we had some challenging years when the economy was in a difficult place, and the efforts of the previous Government and this Government to get us out of that are important. We need to look at the trajectory over the first few years of the child trust fund and over the next 12 months. 

My first contention is that the review would be useful; not to revisit the battles that we are having in Committee, on the Floor of the House and, possibly, in another place, but simply for the world to know whether the child trust fund did what it said on the tin, which was to raise the savings ratio and deal with the poorest in our society. We should see whether the next 12 months see a rise, a fall or stability in the level of saving compared with previous years and that period particularly. 

Secondly, what is the impact in terms of some of the issues we talked about this morning—for example in relation to looked-after children? The payments will stop on 3 January and we will have 12 months, if the review happens, to see what has happened. The Minister said that local authorities could give money towards the ISAs. I would like to know, formally, in 12 months’ time how many local authorities have done so, which ones, and how much they put in. We do not want a postcode lottery of local authorities determining who provides the money. 

It might be fair for Cornwall county council, the hon. Member for Truro and Falmouth’s council, to put money into the child ISA, but Hereford and Worcester county council—Worcestershire county council, or whatever it is called nowadays—might not put in money. In my area, Flintshire county council might be able to do it. The borough of Newham might not be able to, because it has a range of pressures due to poverty and other difficulties faced by the constituents of my hon. Friend the Member for West Ham, which we can compare with the pressures in Reading, for example. I do not know the answers, but in 12 months it will be worth examining whether looked-after children are being treated as equally as they were under the child trust fund by whatever arrangements replace it on 3 January next year. 

It is fair to make an assessment. The proposal is not meant to be politically charged; it may be that Tory authorities put money in and Labour authorities do not. The assessment might show my colleagues in local government in a bad light or show the Liberal Democrats in a bad light. I do not know, but we need to know which authorities are paying—urban, rural or city. We need to know about those issues. It is an important thing to consider 12 months on. 

Alison McGovern (Wirral South) (Lab):  Does my right hon. Friend agree that the discussions we had this morning were instructive in showing how difficult it can be to get the right products to encourage the savings culture that we all want? A report, after a year, would give us all a chance to check and ensure that the product is right. 

Column number: 213 

Mr Hanson:  Indeed. The difficulty I face with the general suggestion, and which I put to the Committee in relation to my amendment, is that perhaps 12 months is too soon. Maybe we need a review later on. We learned today that the junior ISA will not be ready until October next year, so it will not have been running successfully or for very long before the review takes place. I hope that the Minister will indicate that he accepts the amendment and, potentially, will review it further down the line. 

The amendment is not about being malicious about the revised product or about the abolition of the child trust fund. I simply want to say to my hon. Friends and to the Committee that when we take action it is important that we do not simply forget about it; we need to review it to see whether the replacement product meets the objectives for the previous product. Those were to increase the savings ratio and to try to give cash assets to the poorest and most vulnerable in our society. We need to look at the impact of the measure on the three devolved Administrations and to ensure that we do so in a way that learns lessons from the 12-month operation. 

As I said, the effect on looked-after children could be one area we look at. The Minister suggested that looked-after children could be supported by local authority contributions. It is important to consider the point about a postcode lottery. We will know within 12 months what the policies are of each local authority in relation to that. The impact on children with disabilities, through the abolition of the disabled person’s additional finance, is equally important. Scope’s evidence suggested that it was extremely worried about that. I have taken that evidence in good faith, and I would like to see a review of whether the evidence rolls out in practice to impact on those particular areas. 

We have had some fun, kicking around different manifesto commitments. The important point, however, is that the Minister believed, earlier this year, that in making a manifesto commitment to look at the poorest third of children, it was important to maintain the child trust fund. He must have had a reason for that. He needs an opportunity to reflect on whether the total abolition of the scheme is detrimental to the poorest third of children. I want him to go back to his electorate and say that he has completed his manifesto commitments. If the removal of the child trust fund, as witnesses have said, will increase inequality, damage the poorest third of our community and make the poor poorer, he needs to reflect on that in 12 months’ time to see whether he needs to tweak his junior ISA. 

We need to look at how the junior ISA is operating in practice, although I accept that January 2012 may be a little early to do that. We need a formal review of whether that product is meeting its objectives. That could be commenced in January 2012. I hope the Minister will do it on a regular basis. The review could first look at who is contributing to the junior ISA. Is it, as in the figures I have quoted on the child trust fund, the wealthier areas of the country that have higher take-up, such as, dare I say, Fareham? Those areas have a higher take-up, as high as 83%, than some areas in Northern Ireland where it was as low as 50%. Is the junior ISA being taken up by those in the poorest third of constituencies? Are people in West Ham contributing to the junior ISA to the same degree as those in Fareham? That is not to be qualitative about the outcome of the discussion, but

Column number: 214 
we need to know how the junior ISA is working in practice, downstream, so that we can judge whether it is meeting its objectives. 

We also need oversight of what the impact is of the loss of that resource going into the child trust fund as a whole, in relation to the higher and lower payments across the board. That would be useful. I need the Minister to tell me what the costs of administering the remaining child trust fund scheme are in that 12-month period, how those costs are being borne by the Treasury and what their impact will be on his deficit reduction plan. We need to look at those issues as a whole. 

My last point is about the providers of existing child trust funds. We have heard from the Children’s Mutual and others. Children’s Mutual is the major provider of existing child trust funds. It will have a legacy provision for many years to come—possibly as many as 18 years from 3 January 2011. It is important that we look at what impact clause 1 has on the providers in 12 months’ time. Each and every provider entered into the child trust fund in good faith. They invested resources in developing the child trust fund product in good faith. They even, before the general election, looked at the lie of the land and thought, in good faith, that of the two parties that were likely to form the Government, one supported the current objectives of the child trust fund and the other supported its being operated for the poorest third, looked-after children and children with disabilities. They accepted, in principle, that they have put investment into the child trust fund, which will continue for some time. They now find that if clause 1 is accepted, on 3 January all the things that they believed were truths will disappear and the landscape of the child trust fund will be dramatically altered by policy decisions. The Minister is entitled to take such decisions, but they will change the landscape completely. 

It is important that 12 months on, and two or three years on, we consider what such a change means for the providers of the existing child trust funds in relation to their economic viability, and to their ability to generate a rate of return that will ensure a reasonable dowry at age 18 that is of value to people who have the funds now. Again, I declare a semi-interest in that one of my four children is the recipient of a child trust fund. 

A key point is that this morning my hon. Friend the Member for West Ham expressed a degree of scepticism, which I pooh-poohed, about the ability of the child trust fund to survive for the next 18 years; I want it to survive for people who currently have it. I am worried that if we do not review the fund in a positive way after the first 12 months, the current fund providers might at some point in the next two years come to the Minister and say, “We’ve been trying to make the best of this. You have sliced our legs off—and our head, and our arms—but we’re struggling along as best we can. Unfortunately, we can’t run this profitably to make a return for the child trust fund investors, and we’re making a loss on the costs of providing the fund to date.” The Minister will say, “I’m sorry about that—that’s a great shame. I can’t do much about it—the deficit’s this and we’re trying to do that. These things happen—it’s part of the policy consequences of what we have done and, unfortunately, that’s the way it is.” At some point in future, there might be demands to fold the existing child trust fund. 

Column number: 215 

The amendment would give the Minister the chance to consider formally those pressures over the next 12 months; to consider how such pressures are being developed; to consider whether Children’s Mutual is able to continue providing its current level of service; to consider whether the smaller providers, which are much more dependent on the level of Government contribution, can continue; and to consider whether he wants to review such issues in a positive way. 

I think that the Minister will want to ensure that those who have put their own private money into supporting the public contribution to the existing child trust funds get the best return. Such people, who have contributed from their own savings and who are from all sections of the community, might be worried if the capacity of organisations such as Children’s Mutual, and particularly the smaller organisations, were greatly diminished. 

I would particularly like to see whether the savings contributions by parents to the existing child trust funds, which operate until 3 January 2011, continue at the same level after that date. There may be a temptation for people to think that because the child trust fund is dead, they should not put any more money into the existing funds. People might wonder why they should do that when they could transfer to the new junior ISA. That would make the current child trust funds, which will still operate, even less viable than they are now, because of the scale of the operations. The Minister should review such matters seriously in the next 12 months and reach conclusions. 

The amendment is straightforward. With the integrity with which I have tabled it, it would not deny the Minister’s abolishing the trust fund under clause 1, nor would it deny his having already reduced the payments in July. We opposed both those measures, and we will oppose clause 1 when the opportunity arises. The amendment would not stop the Minister doing those things, however; it simply requires him to produce a report in 12 months’ time to consider the impact of the provision on the providers, the recipients, the savings ratio, the contributions, the success of the junior ISA, and all the issues that we have discussed at great length today. 

I hope the Minister will not see the proposal as a wrecking amendment in any way, shape or form. It cannot stop him doing whatever he wants to do. It is simply an opportunity for him to come back to the House and put a formal review in the Library. We can then learn lessons and see whether we need to tweak the decisions that we will be taking in the next few weeks and months. 

5 pm 

Alison McGovern:  I want to make a few brief remarks in support of the amendment and also to ask the Minister a couple of questions. Earlier today, I raised an issue about the statistic that he provided for the 2008-09 financial year and what a strange year that was. In our opinion, it was a very distressing year for many, especially those on low incomes. That point is at the heart of my remarks, and I hope the Minister will take this opportunity to provide the Committee with further information that the Treasury may have on savings rates and ratios across the past decade or so, and how the child trust fund has contributed to building a savings culture. 

Column number: 216 

Some economists believe that savings ratios may be counter-cyclical. There is some statistical evidence that the savings ratio moves in an opposite direction to the economic cycle, which is odd, because when interest rates are low, it seems that the rate of interest people might expect is not necessarily connected to their propensity to save. However, that propensity may be affected by feelings of uncertainty and nervousness, although, globally, propensities to save can be observed to be related to a wide variety of things. In China, we know that it is connected to the absence of a welfare state, the inability to join a trade union and the lack of family support. I digress, but we have an opportunity for the Government to examine the savings culture, especially of those on low incomes. 

The statistics mentioned earlier on how much low-income families have put into child trust funds could be explained by a number of factors. I could imagine a correlation for people on low incomes who faced either the threat of redundancy or actually being made redundant in the financial year 2008-09. That could have had a grave effect on their ability to pay into a child trust fund. The amendment is important in providing us with an opportunity to look at that point in depth. If we believe the economists who say that the savings ratio is likely to be counter-cyclical, that would mean that the child trust fund came into existence in an economy in which we might have expected the savings ratio to be steadily falling as the economy was perceived by many to be steadily growing. 

We had a long period of growth from 2000 onwards. The child trust fund came into being after people had expected steady rates of growth, because that is what they had grown used to. It might be the case that the child trust fund meant savings were being made at a time when we might have expected the savings ratio to decline. From the perspective of economists in the Treasury and elsewhere, and from the perspective of non-governmental organisations and the third sector, a review carried out by the Government would be extremely important. It would help to inform debates in the House and elsewhere about how we encourage the savings culture, especially for those on low incomes and for children who are likely to be asset-poor in the future. 

Mr Hoban:  There have been a series of views on what the report might cover; we should probably start it now, given the range of such views and the fact that the right hon. Member for Delyn wants it published by 3 January 2012. At that point the vouchers for CTFs opened until 3 January 2011 would only just have expired, so perhaps he was right to suggest that the date was too early, and maybe on that basis he should withdraw his amendment. 

Mr Hanson  rose—  

Mr Hoban:  I am just warming up. 

Lyn Brown (West Ham) (Lab):  That fills us with joy. 

Mr Hoban:  I am sure it does and so it should. 

The right hon. Member for Delyn may want to come back with a more sensible date on Report—that is his choice. I will deal with the themes touched on by him and by the hon. Member for Wirral South on the

Column number: 217 
impact of the abolition of the child trust fund. On the impact that it might have on the savings ratio, which they both commented on, I am interested in the right hon. Gentleman’s view that the CTF has driven it up, because in 2008 the savings ratio hit its lowest point since the 1950s, when it was actually negative. I cannot see a causal link between the savings ratio and the child trust fund, and if there is one, it did not work in 2008. The amount of money in CTFs is unlikely to have an impact on the overall level of that ratio. 

As has been mentioned, in relation to whether CTFs have been effective, we know that only 13% of the poorest families contributed to such a fund in 2008-09, and the Committee should bear in mind the number of families on low incomes who still contribute to ISAs. The hon. Member for Wirral South suggested that 2008 was just a bad year for that group, but CTFs started in 2005, and the years 2006 and 2007 were also bad years for savings. In 2006, the figure was 14.6%, in 2007 it was 13.8% and in 2008 it was 13.3%, so 2008 was not a particularly bad year. 

The hon. Lady said that perhaps people were lulled into a false sense of security by continuing economic growth and therefore they did not save. Perhaps they believed the former Prime Minister, when he said that there would be no return to boom and bust. If they had disbelieved him, they might have saved a bit more for a rainy day. The previous Government’s record on savings was lamentable, and Opposition Members can take no comfort whatever from the measures that they introduced to improve the savings ratio, given that it fell during their time in office. 

Harriett Baldwin (West Worcestershire) (Con):  During the Committee’s first oral evidence session, we heard from the Institute of Fiscal Studies that the effect of getting rid of the child trust fund on national saving is “about zero.” 

Mr Hoban:  My hon. Friend hits the nail on the head. It is hard to argue that there is a general link between CTFs and the savings ratio. 

Alison McGovern:  Actually, the point I was trying—perhaps badly—to make was rather more subtle: given the way the savings ratio moves or the way in which the data appear to move, it is difficult to unpack the impact of the child trust fund without considerable work to control for other factors. The hon. Member for West Worcestershire made an interesting remark about the impact or otherwise of the child trust fund, but there is a micro-macro question. The report might look both at the micro impact on families and on what they might otherwise have done, and at the macro effect that such Government measures might have on the child trust fund. I do not think that I ever suggested that the child trust fund had a driving-off impact. The most important point, however, is that an inquiry of that nature—whether this year, next year or in five years’ time—would be incredibly useful, and the amendment is trying to make that point. 

Mr Hoban:  The hon. Lady makes an interesting point. If she had been an MP in the previous Parliament, she could have suggested to her hon. Friends on the

Column number: 218 
Treasury Benches that there should be a pilot study about the impact of the child trust fund. However, that did not happen. Such a study would have proven whether child trust funds were effective at that point. We have made our choice about the direction we want to take savings policy, part of which is the junior ISA. I do not want to get sidetracked into a long debate about that. Other measures have been taken to improve the savings environment in this country. 

If people want to save, there are vehicles that will succeed the child trust fund. There is a view on the Opposition Benches that people on lower incomes just do not understand ISAs. That is surprising, given that the evidence shows that 12 million people with incomes of less than £20,000 have an ISA. The product is well known among people with lower incomes. Someone on the Opposition Benches suggested that the product is the preserve of the elderly. Only 20% of ISAs are held by the over-64s, whereas twice that proportion are held by the under-44s. Clearly, the product is understood by people on low incomes and by people who are at the younger end of the age spectrum. 

There was a discussion about the impact of the end of the CTF on providers. The advantage I have, for obvious reasons, over the right hon. Member for Delyn is that I spoke to a number of providers during the formulation of the policy, so I understand the impact that it will have. The argument in relation to existing providers is that the amount in the child trust fund will be sufficient to enable them to service the back book of business, as it were. A number of providers were concerned about the lower rates that we announced in July and said it would not be economically viable for them to continue. As a consequence of representations made by providers, we laid regulations last month that would enable child trust providers to close to new child trust fund business in order to secure their long-term viability. 

Of course, the new replacement product has been warmly welcomed by existing providers and other financial institutions. We are working with them to ensure that the sunk costs they have invested in the systems can, as far as possible, be recycled into arrangements for the new product, and that they reuse those schemes, rather than spend money on new software and IT. We have already done an awful lot of work on developing the policy. We thought about the implications for saving and for providers, and considered the data we already have available. In reality, producing a report—whether for next January or the January after—would be a poor waste of taxpayers’ money. If the right hon. Gentleman chooses to pursue the amendment, I will advise my hon. Friends to oppose it. 

Mr Hanson:  Perhaps it is the nature of my job in this Committee to be disappointed by what the Minister has said, but I confirm, for the avoidance of any doubt, that I am disappointed with what he has said. We are not asking a lot in the amendment. We are simply asking that the implications of the measures the Minister is proposing—when agreed by the Committee, the House, another place and Parliament as a whole—are reviewed in 12 months’ time. 

I introduced my comments by saying that perhaps the date of 2012 was slightly premature. I will happily withdraw the amendment if the Minister agrees that maybe, let us say, in three years’ time in 2014—[ Interruption. ] The Minister is not listening—he is not

Column number: 219 
even listening to the fact that I am telling him he is not listening. [ Interruption. ] I thank the hon. Member for Bristol West for listening because there is nothing more frustrating than making an argument and not having people listen to it. [ Interruption. ] The Minister makes some derogatory remark about the quality of the argument. It is not my argument; it is the argument of people outside the House. Today, I am a channel for some of the arguments that are being made by voluntary agencies, academics and the providers of services. It is incumbent on the Minister to listen to those arguments and to defend his position in Committee. That is what democracy is all about. If such measures were not taken, we could have happily rolled over and let every part of the Bill go through without amendment. We have not done that, because there are important matters to be discussed. 

5.15 pm 

The important matter that we must discuss now is whether the measures in the Bill will do what the Minister intends them to do in an effective way in 12 months’ time. I cannot see that to have a report, which the Treasury would probably do anyway—at least, I hope that it would—to assess on a continuous basis the impact of its policies, to have that report formalised and published by January 2012, potentially even as part of the Red Book, which is now the Green Book in respect of our discussions on the Budget, at some point in the future, would be a damaging exercise for the Government to undertake. It might even make their case, and the hon. Gentleman could stand up in future and say to me from the Dispatch Box, “We have done this report. It shows that everything you said in Committee was tosh and that what we as the Government said was correct.” If that were the case, I would take a kicking from the hon. Gentleman and have to accept the position. 

However, the Minister does not want to produce the report and publish it because, secretly, he knows that the measures he is taking today will increase inequality, hit the poorest hardest, damage the interests of disabled children, and wreck the existing savings that are being undertaken for the current child trust fund. It will not necessarily show that the current revision of the product that he is bringing forward some time next year, details of which we are not sure about, will be a positive incentive. It will not show what the savings will be as a result of the new product, and it will not show whether it is just middle-class, well-off people putting in the money. None of the facts will emerge unless we assiduously table questions to find out such answers by stealth, as I promise him I will do if I still have the honour to hold this position. 

The Minister could author and produce a report under his own volition or he could find himself answering 500 parliamentary questions tabled by me and my hon. Friends in 18 months’ time about the impact of the measure. That is the choice before him today. He can avoid some of the discussions, but he cannot hide from some of the arguments. In due course, we will table questions to discover whether inequality has risen, whether the take-up has not been as good and the trust fund is attracting only those who can afford to put money into it, and whether the disabled or looked-after family have been disadvantaged. We will find a way in which to find out those things. Treasury Committees can product reports on such issues. Parliamentary questions can be tabled. Debates can be held. We can discuss the issues. 

Column number: 220 

I am simply giving the hon. Gentleman an opportunity to frame the debate around a report in which he can put the issues in context and produce it for the interests of all the people involved. I remind him that the amendment would not stop him doing anything. He can do all that he has said he wants to do. It simply asks him to produce a report on the impacts of the policy in due course. I would be happy to withdraw the amendment if he suggested that I table one on Report to ask for a review in three years’ time, and picked the date of 3 January 2014. Would the hon. Gentleman accept such an amendment? I give him the opportunity to intervene and tell me whether he would accept an amendment whereby he would produce a report in three years’ time rather than the 12 months that we have outlined today. Does he want to intervene? 

Mr Hoban :   No.  

Mr Hanson:  Just for the record, the Minister has said no. He is not interested in knowing the impact of his policy in 12 months’ time, in two years’ time, in three years’ time—not ever. It will therefore have to be for me and my hon. Friends to find a way in which to ensure that we get that information to date. The hon. Gentleman might well find himself in 18 months’ time before the Treasury Committee having to examine such issues. He might find himself answering 500 parliamentary questions tabled by me and my hon. Friends. He might find himself in debates. We might pick Opposition days to discuss the matters. He will be a lot busier than if he just accepted the amendment and produced a report for us to scrutinise, comment on and use accordingly. However, if he wants to waste Treasury resources to deal with matters in that way rather than accept the amendment, so be it. 

The art of opposition was not lost on Ministers such as myself when we were in government. We have seen and learnt some lessons from the hon. Member for Fareham and his colleagues. We can make life difficult for Ministers. We can fill the hon. Gentleman’s box every week of the year with questions, letters, preparation for debates and Treasury Committee briefs, all because he does not want to have a report of his own in 12 or 18 months’ time on this particular issue. If that is the Minister’s choice, let him vote for it. 

Perhaps I can invite his hon. Friends behind him to vote with the Opposition on this occasion, simply to relieve him of the some of the burdens that he will have to face by answering the questions further down the line in a different format. Perhaps the hon. Member for Bristol West, who I know is a considered individual—I am pleased that he stayed—could help, in the spirit of co-operation in the coalition, by voting with us, to relieve the Minister of that burden in 18 months. Perhaps the hon. Members for Truro and Falmouth and for Devizes could do the same, simply to relieve the pressure on the Minister, because I do not want to see him overburdened and stressed in 18 months. 

Claire Perry (Devizes) (Con):  The right hon. Gentleman raises the issue of not wasting taxpayers’ money in tabling numerous parliamentary questions. Surely where we are going with this chuntering from a standing position is a perfect example of wasting taxpayers’ money. 

Column number: 221 

Mr Hanson:  I am very interested in what the hon. Lady says. 

The Chair:  Order. I do not think that that relates at all to the amendment, and I do not think you should respond to it. 

Mr Hanson:  The amendment is there because we feel strongly that we should review the policy. It is good management practice to implement something, look at how it works, learn lessons, be open and transparent about the lessons, and potentially make changes. I am not stopping the Minister doing anything. What I am doing today is exercising the historic rights of people in this place to argue a case for certain issues—if chuntering is the word for it, so be it. If the Minister does not like it, that, I am afraid, is tough. We have until 4 o’clock on Thursday to debate the Bill. We feel strongly about it, and if I wish to debate the Bill until 4 o’clock on Thursday, I and my hon. Friends will debate it until then. We will continue to debate it for as long as we wish to. That is the nature of the business. 

For 13 years, I sat where the Minister sits and I listened to arguments from the Opposition Benches, and occasionally, dare I say, I have accepted some of them and tabled amendments to the House based on some of the points made by the Opposition. The amendment simply says to the Minister, “Review it,” which is a valuable point. If he wants to bring it back in three years’ time to review it, that is fine by me. I will table an amendment, come what may, on Report, which I hope will be selected by Mr Speaker, which will give an opportunity to review it in three years. Today, however, I will press the amendment to a vote, and I hope that the Committee will speak. I expect to lose—that is the nature of the business of where I sit now—but it does not mean that I am wrong. 

Question put, That the amendment be made:— 

The Committee divided: Ayes 8, Noes 10. 

Division No. 8 ]  


Brown, Lyn   

Fovargue, Yvonne   

Gilmore, Sheila   

Green, Kate   

Hanson, rh Mr David   

McCarthy, Kerry   

McGovern, Alison   

Ritchie, Ms Margaret   


Baldwin, Harriett   

Bruce, Fiona   

Goodwill, Mr Robert   

Hemming, John   

Hoban, Mr Mark   

Maynard, Paul   

Newton, Sarah   

Perry, Claire   

Sharma, Alok   

Williams, Stephen   

Question accordingly negatived.  

The Chair:  Before we proceed to amendment 36, I give notice that I am minded to conclude that the principle of clause 1, which the Committee has been debating since 3 pm last Thursday, has been adequately discussed in the course of debate on the amendments. When we have disposed of amendment 36, I will put the question that clause 1 stand part of the Bill without further debate. 

Column number: 222 

Mr Hanson:  I beg to move amendment 36, in clause 1, page 2, line 8, at end add— 

‘(5) The provisions of this section shall not come into effect until an equalities impact assessment has been completed by the Treasury.’.

Amendment 36 would require a full equalities assessment on the impact of clause 1 and the abolition of the child trust fund before commencement of the Bill. Again, I am trying to be helpful to the Minister. I recognise that an initial assessment has been made of the Bill’s impact on equality. Helpfully, a paper was tabled formally today that has been available for some time, showing the initial assessment of the Bill’s impact on equalities. I am not filibustering. If I were, I would read every sentence of it for the next 20 minutes to put it on the record, but I am not minded to do so, although my hon. Friend the Member for West Ham appears to be encouraging me to consider that option. Who knows? We will see what the Minister says in due course. 

Having listened to the Second Reading debate and Committee evidence sessions, I am concerned that no comprehensive equality impact assessment on the Bill has been done. The document tabled today is an initial assessment of the impacts on equality. No fuller assessment on impact has been undertaken, although the Treasury could have done so if it wished. I have read it in detail. The Treasury has assessed a number of issues, but has not undertaken the full assessment normal for a Bill. 

Claire Perry:  I am sure that the right hon. Gentleman is aware that during his own Government—I know this because I carried out a freedom of information request—no equality impact assessments were carried out for some fairly major pieces of legislation, such as the last Budget and previous Budget report of the right hon. Member for Edinburgh South West (Mr Darling). Will he comment on that omission while he is discussing this one? 

Mr Hanson:  I am happy to. 

The Chair:  Not too much, I hope. 

Mr Hanson:  I am not interested in other Bills; I am interested in this one. We can debate a range of issues all day, but this Bill will impact hardest on the poorest in society, disabled people and looked-after children. Its later clauses, which we are not debating now, will impact the hardest on women. It will impact hardest on black and minority ethnic individuals. Indeed, earlier today we read SA03 from the Runnymede Trust. In its assessment of why assets matter, the trust said: 

“One of our key findings is that Black and minority ethnic (BME) people have fewer and lower-value asset-holdings than white people. Although there are many reasons for this lower asset wealth, asset-building policies could potentially provide BME people with different and multiple benefits.” 

Taking away asset holdings from the black and minority ethnic population, particularly in constituencies such as that of my hon. Friend the Member for West Ham, will have a disproportionate effect on equality and on the equality impact assessment under the Bill. I am surprised, whatever the hon. Member for Devizes says, that for this Bill, which could hit poor, black and disabled people and women hardest, no fuller equality impact assessment has been undertaken. 

Column number: 223 

The Cabinet Office website says: 

“An equality impact assessment covering race, gender and disability is a statutory requirement and must”— 

must is underlined— 

“be completed for all Bills, even in the rare cases where a full Impact Assessment is not required. The Equality Impact Assessment should be published alongside any white paper or consultation on the proposals in the Bill, then alongside the Bill itself when it is published in draft or introduced to Parliament.” 

5.30 pm 

To be honest, I had not considered tabling the amendment before the commencement of the evidence sessions last week. I had not considered whether a full impact assessment would be needed, and I would not have tabled the amendment had we not had the evidence sessions. Members can believe that or not, but it is the truth. I tabled the amendment by way of a manuscript draft that I gave to the Clerk during the evidence session, and I did that because Mr Marc Bush, head of public policy at Scope, said: 

“There is real concern that, as with other measures, there has not been assessment of the impact that the measure will have on specific groups. Groups that will be disproportionately affected by the reform are families with disabled children, and disabled people themselves. My concern is that if we put a new saving mechanism in place and it does not have that level of scrutiny or, especially, that impact assessment, we will not know what the impact will be of transitioning from a child trust fund to a junior ISA. For us, that is a real concern”. 

That was backed up by Anne Longfield, who has already been quoted, in the same evidence session. She said: 

“We think that there are huge risks of children falling off. There are some good basic principles in place, but there is a huge risk of throwing out the baby with the bathwater. There needs to be a responsibility to look at the aspects in great depth and really to scrutinise what they will mean and what the impact assessment will be. We owe it to those children whose expectations we have already raised on this to look at the issue and make those decisions properly. ”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 65-66, Q180 and 182.] 

Whatever the result of the initial impact assessment on equality, we could do a deeper, more thorough assessment, to work through the concerns that we have legitimately raised in Committee, not on behalf of ourselves but on behalf of people outside the Committee. 

I refer hon. Members to the table at the back of the equality impact assessment. Under “Equality Group” it says “Different racial groups” and under “Impact on population” it says “None identified”. Does that mean that the Treasury impact assessment has not looked at the “Why Do Assets Matter?” publication by the Runnymede Trust, which was submitted to the Committee? That document states, independently, that black and ethnic minority people will be disproportionately affected by the child trust fund abolition. It strikes me that “None identified” reflects a relatively cursory look at the impact of the issues on the black and ethnic minority population. Under “Different gender groups” the answer is “None identified,” with “No significant impact identified” of the Bill as a whole. Clause 1 relates to the child trust fund, but the assessment could have made in relation to the saving gateway and the maternity grant, both of which we will consider later. There is a real need for an

Column number: 224 
impact assessment on those issues. Under “Different age groups” and “Transsexual or transgender” the answer, again, is “None identified”. Under “Different political opinion”—we can accept that there is a bit of a difference there, and an impact—the assessment states “None identified”, in the broadest sense of the word. 

The impact assessment that has been done, welcome though it is, is not as thorough as a full impact assessment could be. Try as the Minister might, he will not convince me that the Bill will not increase inequality and unfairness, and do great damage to disabled people, looked-after children, women and black and ethnic minority populations. Therefore, I ask again that he consider the amendment. I do so, finally, because the amendment will not stop the Minister doing anything. 

Clause 1 will, undoubtedly in short order, sail through the Committee. It will shortly again be considered on the Floor of the House of Commons, and in another place in the next few weeks. At some point the matter will be settled, and the child trust fund, if my runes are read correctly, will be abolished. All I want to ensure from the Minister, before that final statement is taken, is that we look at every nook and cranny to ensure that no groups are disadvantaged disproportionately by the legislation, and that we do so in a way that means, if the Minister continues to force the Bill on the British public, at least he does so in the full knowledge of the impact of the Bill—in relation to not just the groups I mentioned but also, referring to an earlier debate, to the differences for the populations in Northern Ireland, Wales, Scotland and across the country. 

I ask the Minister to reflect on the amendment. If it is faulty, as it usually is, I ask the Minister perhaps to table his own amendment in due course—I will withdraw mine on that basis. If he is able to do so, I ask him to produce the further assessment before the matter is considered for a final time. 

The Minister needs to reflect on such matters and, before he presses the button to end the scheme, he needs to know exactly what the Bill will mean. I commend the amendment to the Committee. 

Kate Green:  I want to speak briefly in support of the amendment, with particular reference to an equality impact assessment with regard to black and minority ethnic people. 

I want to highlight that such communities are often particularly reluctant to use mainstream financial institutions. Sometimes that is because they are intimidated—I guess it would be reasonable to say—by the institutions or feel that the institutions would not welcome or serve their needs well. Sometimes, indeed, the products of those financial institutions might be inimical to the cultural values of some of the ethnic minorities who are potential customers but, because of the nature of some of the services provided by the institutions, who might feel that they cannot be the customer of such an institution at all. 

I draw no conclusions about whether the child trust fund in any way served to get around some of those difficulties or opened up access to a different range of financial institutions for black and minority ethnic savers. However, I consider the Government’s impact assessment to be slight. I would like to have seen it review much more fully a group that significantly under-saves and

Column number: 225 
lacks assets. Therefore, it would have been useful to understand the attitudes to financial institutions and whether the child trust fund offered any learning points. 

The other point that I would highlight specifically is, again, quite typical in some of the black and minority ethnic communities in my constituency—indeed, in some white communities too. As my right hon. Friend the Member for Delyn suggested, there is a sort of indirect equality impact issue in relation to women, because mothers are probably particularly likely to have taken an interest in the savings that were undertaken for their children through the child trust fund. Again, I draw no conclusion as to what might have been uncovered by a proper equality impact assessment, but I am genuinely interested that we should have had one. That is why I support the amendment and I hope that the Minister will address the points. 

Mr Hoban:  The debate has been helpful, but the right hon. Member for Delyn rather brushed off the intervention of my hon. Friend the Member for Devizes. The right hon. Gentleman should be commending us for going further than his Government went with equality impact assessments and for making an initial assessment. I cannot remember one being done for the 10p tax rate, which had a huge impact. The shadow Minister and the hon. Member for Stretford and Urmston should, therefore, be congratulating us for what we have done, because the previous Government, which the hon. Lady would have supported, did not do such things. We have actually made a significant move forward in meeting our statutory obligations. It is right that we pay due regard to the need to eliminate discrimination and promote equality when we consider policy options. If policies have a disproportionate impact on a particular group, it is right that we consider what actions can be taken to avoid or mitigate any unfair impact. A full equality impact assessment is only one way of demonstrating that we are taking these factors into account. The absence of a full assessment does not mean that we have not taken them into account, and full equality impact assessments do not need to be used in all circumstances. However, they should be used when they have effectively contributed to the analysis and development of policy options. 

On 15 September, we prepared and published our initial assessments of the equality impact measures, including in relation to this Bill. The various mitigating measures have been rather more extensive in covering different groups than the right hon. Member for Delyn implied. He simply mentioned the first two lines in one box of the impact assessment, which state “none identified,” without taking into account that we then talk through the consequences of the measures for different groups. 

The assessment we published back in September sets out the impact of the measures in the same way that any further equality impact assessment would. It demonstrates that the ending of CTF eligibility will have an impact on people with disabilities and on different age groups. However, that impact is likely to be limited. We have already made it clear how we will mitigate the effects of child trust fund changes on disabled people by recycling the money that would have been used for additional payments into additional respite breaks. We have talked

Column number: 226 
about how we will help disadvantaged children in our society build assets with the new junior ISA, which will assist in their transition to adulthood. We will make sure that the junior ISA is accessible to disabled children, looked-after children and children from lower income families. In the context of the child trust fund, we have gone through a proper analysis of the impact on different groups. Unlike our predecessors, we have published that information—I even tabled a written ministerial statement to draw the House’s attention to the matter. 

Claire Perry:  Is my hon. Friend saying that he has never in his years as a shadow Minister seen any equality impact assessments carried out by the previous Government on any financial matter? 

Mr Hoban:  My hon. Friend tempts me. I cannot recollect seeing any at all. So it is a bit rich to be preached at by the Opposition, given their failures to address these issues when they were in Government. I encourage all my hon. Friends to take it with a pinch of salt when the right hon. Member for Delyn expresses disappointment again and seeks to help us by pushing his amendment. The Opposition do not have much of a track record on this matter, and I am rather surprised in their courageousness in pressing the amendment. 

Alison McGovern:  Surely the point that the Minister is making is a little bit like wondering whether Wilson or Callaghan might have made equalities impact assessments in that the procedures for such assessments have been shaped by quite recent equalities legislation? I dare say he has a point and I am not trying to say that the previous Labour Government were perfect in any way, shape or form—I would not say that because I have a little more grace than perhaps some hon. Members—but does he recognise that our role as the Opposition is not to comment on previous practice, but to question the Government on what they might do today? 

Mr Hoban:  The hon. Lady addresses the matter with a due tone of humility, and recognises the failures of her colleagues in Government. 

Alison McGovern:  Imperfections. 

Mr Hoban:  The hon. Lady says imperfections; I prefer the word “failures.” She accepts that the previous Government failed in this area, and I hope she recognises that we are taking the matter forward and dealing with it very seriously. When the right hon. Member for Delyn pushes the matter to a vote, I hope that she will recognise with humility that the previous Government did not deal with the issue particularly well. This Government are making real strides in ensuring that there is an impact assessment and she should give us the benefit of the doubt. 

We have done a very thorough piece of work in identifying some of the impacts of the measure. It is important to think about these things very carefully. I know that we have done so in preparing the policy. We think that the document that we published in September sets that out clearly. With that, I would encourage the right hon. Member for Delyn to recognise and share the humility of his hon. Friend the Member for Wirral South—his neighbour across the border in England—and accept that his Government did not get it right, and that this Government are making real strides to ensure that these things do happen properly. 

Column number: 227 

5.45 pm 

Mr Hanson:  With humility, I do not intend to withdraw the amendments. It is important that we reflect on the need for a full equality assessment on the Bill. I say that because the Bill will impact upon the poor, the disabled, looked-after children and those from the poorest regions of the United Kingdom. We need to reflect on that and the assessment that has been made. 

Let me pick up on a couple of points on the current assessment—copies of which are available to all members of the Committee. First, I will look at different language users. The current assessment states: 

“Some of the affected population will have different language needs, but there is not expected to be a disproportionate impact on these groups.” 

Fair enough, we will accept that as a starting point. Secondly, it states: 

“HMRC will consider requests from individuals or groups for communications on these changes to be in languages other than English.” 

At the moment, the Bill will abolish the child trust fund and it will do so in English. It “will consider requests” from individuals or groups for the changes to be communicated in other languages. For example, what information will there be on the new child trust fund ISA that is being established? I happen to represent a constituency where the language is predominantly English, but 16% of my constituents speak Welsh as a first language. I have few other languages spoken in my constituency, but I could point to others in inner-city London where 30, 40 or 50 languages may be prevalent. 

Kate Green:  My right hon. Friend draws attention to an important issue in relation to community languages. Many different languages are spoken, particularly in the Old Trafford ward in my constituency. I am very aware of what he his discussing. Does he agree that—in addition to the need to consider the provision by HMRC of information about the proposals in community languages—one of the reasons that an impact assessment would have been helpful is that it would have enabled us to compare how information was given about the launch of the child trust fund and the entitlement to the child trust fund in different languages with what commercial organisations offer? That might offer some useful learning points for the Minister, who is thinking of introducing the replacement junior ISA through a commercial vehicle. 

Mr Hanson:  My hon. Friend makes a valuable point based on her constituents’ experience in the Greater Manchester area where a number of different languages are spoken. The current assessment, which is not detailed enough to meet the objectives that I would want to have in place, states: 

“HMRC will consider requests from individuals or groups for communications on these changes to be in languages other than English.” 

That presumes that people know to request those things in the first place. It presumes that the languages that are used will provide sufficient information. I would not want to see the new child ISA fail, particularly for the poor, the black or the illiterate, because the information was lacking, because the only language was English or that HMRC will only “consider” requests for the information to be provided in other languages. Before I withdraw the amendment, will the Minister give a commitment to the Committee that, before Report stage,

Column number: 228 
he will produce some information about how in many languages, in what form and when, HMRC expects to transmit information about the new child ISA and the abolition of the child trust fund to the many people who will require it? I am afraid that that backs up the comments made by the Runnymede Trust that insufficient consideration has been given to the transmission of the information and that the changes will disproportionately hit those from black and ethnic minority communities. 

On the question of disability and the child trust fund, the current impact assessment states under “Mitigating Action”: 

“The Government has announced that the money that would have been spent on additional payments to the CTFs of disabled children will be recycled to provide additional respite breaks, from 2011-12. The funding would allow for upwards of 8,000 week long respite breaks each year.” 

It does not say that the funding is only for England. The 8,000 week-long respite breaks each year will not be funded for the constituents of my hon. Friends the Members for South Down and for Edinburgh East, or for my constituents in north Wales. The impact assessment says that problems in relation to disabled children will be mitigated by 8,000 week-long breaks, which do not apply to three nations of the United Kingdom. The Treasury has not conducted a thorough impact assessment on the impact of the legislation. 

Kate Green:  Does my right hon. Friend agree that the impact assessment completely misses the point? We are comparing the protection of young adults as they begin their adult life with an asset that enables them to open up choices and develop their aspirations with a very important respite provision for children and their families, which addresses their immediate need. Saying, “The money will be spent on some other completely different need and that is a sufficient consideration” trivialises the impact assessment. 

Mr Hanson:  I am grateful to my hon. Friend for her comments. She has basically said what I was going to say next. [ Interruption. ] The hon. Member for Scarborough and Whitby says that we will save time. Just to make the point, I will say it, anyway. My hon. Friend the Member for Wirral South says she would like to hear it. Let me say to the hon. Member for Scarborough and Whitby and to my hon. Friend the Member for Wirral South that the proposal for providing 8,000 week-long respite breaks each year for disabled children in England—not in Wales, Scotland or Northern Ireland—trivialises the nature of the child trust fund, to echo the points made by my hon. Friend the Member for Stretford and Urmston. The fund was about building a capital asset for people at the age of 18 to help them meet the needs of their 18th birthday and beyond, and to help with accommodation, tuition fees, employment and training, and the challenges that will affect them in the years 2020 to 2029 and beyond. It is an entirely different product if one of the mitigating factors in terms of the impact on disabled people is to say, “Well, give them a respite break for a couple of weeks”, welcome though that is. 

If the constituents of my hon. Friend the Member for Wirral South can have a respite break across the border in Heswall, so be it. We will look from our side of the border with great admiration at the fact that those 8,000 children can have that respite break, but it is not

Column number: 229 
going to happen in Wales, Scotland and Northern Ireland, and it is not a substitute, as my hon. Friend the Member for Stretford and Urmston said, for the capital asset-building product that it is replacing. So, I do not think that the impact assessment has done justice to the impact of this measure on children and others with disabilities. 

On the question of “with or without dependants”, the impact statement says: 

“CTF: While parents are involved in opening and managing CTFs, they are the property of the child. No specific impact has therefore been identified on those with or without dependants.” 

We have spent hours discussing the question of looked-after children. Under “Mitigating Action”, the impact assessment says, “No mitigating action necessary.” So the impact assessment says that there is no impact on looked-after children, and there is no mitigating action. The Minister has missed a trick. Whatever previous Labour Governments have done, I do not think that their legislation was about increasing inequality, unfairness and poverty and removing life chances. They were about trying to tackle those issues. I wish I could give the Minister chapter and verse on what previous Finance Ministers have done in relation to equality impact assessments. Unfortunately, I cannot. I am trying to explain in a helpful way. I was in the Home Office, the Ministry of Justice, the Northern Ireland Office and the Wales Office at No. 10. I cannot be responsible for what happened in Treasury Departments. I cannot give him chapter and verse on that off the top of my head; I can say that the Bill will damage equality. It will hit the poorest hardest—disabled people, black people, people from ethnic minorities and looked-after children—and will damage their life chances. A thorough impact assessment has not been carried out and, just on the points that I have made, we cannot accept the measure and must press it to a vote. Before I do so, I would welcome the Minister’s response to my comments. 

May I place on the record that the Minister does not wish to respond to the fact that Her Majesty’s Revenue and Customs would “consider requests” from communications in languages other than English? There are ways in which we can deal with these matters: we can be friendly and co-operative in Committee and we can ask questions gently, which the Minister can reflect on and respond to. If he does not do so, we must consider other ways to tease out from him which languages HMRC will produce information in, and how and when. That will involve our tabling parliamentary questions on a range of issues and perhaps segmenting each language in turn, which will fill the Minister’s box and create—possibly only a night’s—inconvenience for him. He could agree today to ask his officials to consider the matter. He could say, “The Opposition spokesperson has made a valid point about how people with a non-English language understand the new ISA, the abolition of the previous scheme, and the later issues concerning the health and pregnancy grant and the saving gateway.” I would hope that on occasion he would, as a Minister, recognise that there might be a scintilla of point in what the Opposition say. 

There are times when I have sat in his chair and thought, “I hadn’t thought of that, the Opposition have made a good point. Let me look at it, reflect on it and come back to it.” The Minister has not done that today. 

Column number: 230 

Mr Hoban:  Just so the right hon. Gentleman can withdraw his amendment and get on with life, HMRC regularly communicates a range of issues in a range of language and is skilled in doing so—the change does not add to that burden. 

I have been thinking about the number of questions on child trust funds that I have answered from the right hon. Gentleman today. One might have thought that he had tabled 20, 30, 40 or 50, but he has tabled none to me. If he is as serious about the matter as he appears to be, he will recognise and know from his experience from having an extensive role in different Government Departments that such Departments are skilled in communicating in different languages. 

Mr Hanson:  The important point is that I am being asked to accept that the impact assessment on equality has been thorough and has dealt with all the concerns. Yet, in the mitigating action, on different language users, for example, it simply states: 

“HMRC will consider requests…for communications on these changes”. 

It would be much more proactive to say, “HMRC will undertake to ensure that there are communications in languages other than English.” That would satisfy me on the matter. In my view, a thorough impact assessment has not been undertaken, so I wish to press the amendment to a vote. 

Question put, That the amendment be made. 

The Committee divided: Ayes 8, Noes 10. 

Division No. 9 ]  


Brown, Lyn   

Fovargue, Yvonne   

Gilmore, Sheila   

Green, Kate   

Hanson, rh Mr David   

McCarthy, Kerry   

McGovern, Alison   

Ritchie, Ms Margaret   


Baldwin, Harriett   

Bruce, Fiona   

Goodwill, Mr Robert   

Hoban, Mr Mark   

Maynard, Paul   

Newton, Sarah   

Perry, Claire   

Sharma, Alok   

Williams, Stephen   

Question accordingly negatived.  

Question put forthwith (Standing Orders Nos. 68 and 69), That the clause stand part of the Bill. 

The Committee divided: Ayes 10, Noes 8. 

Division No. 10 ]  


Baldwin, Harriett   

Bruce, Fiona   

Goodwill, Mr Robert   

Hemming, John   

Hoban, Mr Mark   

Maynard, Paul   

Newton, Sarah   

Perry, Claire   

Sharma, Alok   

Williams, Stephen   


Brown, Lyn   

Fovargue, Yvonne   

Gilmore, Sheila   

Green, Kate   

Hanson, rh Mr David   

McCarthy, Kerry   

McGovern, Alison   

Ritchie, Ms Margaret   

Question accordingly agreed to.  

Clause 1 ordered to stand part of the Bill.  

Column number: 231 

6 pm 

Clause 2 

Repeal of Saving Gateway Accounts Act 2009 

Mr Hanson:  I beg to move amendment 38, in clause 2, page 2, line 10, at end insert ‘with effect from 1st January 2014’. 

The Chair:  With this it will be convenient to discuss the following: amendment 43, page 2, line 10, at end insert— 

‘(1A) The provisions in subsections (2) to (5) come into force with effect from 1st January 2014.’.

Amendment 39, in clause 4, page 2, line 36, leave out subsection (2). 

Amendment 40, page 2, line 39, leave out ‘the rest of this Act’ and insert ‘this Act, apart from section 2’. 

Mr Hanson:  In passing, there has always been added pressure for any member of the Committee to have a name at the beginning of the alphabet, and I sympathise with those who were born with the surname starting with “A” or “B”, because it involves that extra amount of concentration. 

We move on now, having not succeeded in amending clause 1, which is related to child trust funds, to the amendments relating to the saving gateway. Amendment 38 would insert 

“with effect from the 1st January 2014”, 

to clause 2(1), as opposed to the existing phraseology, which will repeal the Saving Gateway Accounts Act 2009 with immediate effect on Royal Assent. I wish to see the Act’s repeal deferred until 1 January 2014. 

The amendment is designed to test whether the Government’s decision not to introduce the saving gateway is about saving money or, once again, about dogma. The proposal in the Bill will certainly save an element of resources because the saving gateway will not be rolled out. However, we need to first consider whether we need an immediate abolition of the saving gateway, or whether we need to reflect during a three-year gap, when we can consider several issues, not least whether the economic situation improves, whether we wish to see the pilots further evaluated, and whether we believe that the saving gateway scheme is a good idea in principle. 

The Saving Gateway Accounts Act 2009 (Commencement No. 2) Order 2010 was made on 24 March 2010, again by the Labour Government, to ensure that we had the development of the saving gateway scheme. That order was revoked by the Saving Gateway Accounts Act 2009 (Revocation of Commencement) Order 2010 on 26 June. That revocation meant that, unfortunately, the first account for savers could not be opened in July 2010, as planned by the previous Government. 

I live in hope that the Minister will reflect on such matters and accept the amendment. Should he do so, I will be the first to go outside this building and praise him. My hon. Friend the Member for West Ham suggests that I buy the Minister a drink. I will happily do that and I will happily put out a press release to say that he has done a good job in accepting an amendment to defer the repeal of the Act for three years. If the

Column number: 232 
amendment is accepted, the saving gateway scheme could be introduced in three years’ time, if the coalition Government believe that the UK economic situation has improved. Will the Minister tell us the coalition’s view on the saving gateway scheme? 

The right hon. Member for Eastleigh (Chris Huhne), a member of the Cabinet, said that he is not, 

“lashed to the mast with a particular set of numbers.” 

He said that it was a bit like setting sail; if the wind changes, one has to tack about to get to the destination. He added that global growth could be either higher or lower over the next three years. 

Let us accept that there is a three-year deficit reduction plan. Whatever our disagreements on that plan—they are many and they are deep—the Government have a plan and if it works, there will be a reduction in the deficit. Savings in public spending will be achieved by that plan, by taking out 500,000 public sector workers, for example, or by generally decimating services. However, savings will be made. 

Growth may occur in the economy as a whole; there may be the creation of further jobs and successful economies. All sorts of things could happen—who knows? By accepting the amendment, the Minister could freeze the pilots with effect from today, maintain the Act on the statute book, and ensure that in three years’ time he revisits the issue and looks at whether revocation of the legislation should progress. 

I would be interested to know whether there is any cost to keeping the Act on the statute book for three years. We would not be taking anything away or developing something that involved a major cost. All we would do is not progress from the pilots to a fully rolled-out scheme. The pilots have happened and they involved a cost. There is no cost in not progressing with the scheme at the moment. Nevertheless, the Minister seeks to abolish the saving gateway scheme and the relevant legislation as soon as the Bill receives Royal Assent. My question to the Minister is about the principle of the saving gateway scheme. 

We know from extensive piloting that the saving gateway scheme was proving successful. It demonstrated that it could generate new savers and new savings. Crucially, individuals continued to save after the end of their accounts. We know that because the Bill had support from across the House. 

It may be uncomfortable for me to remind the Minister of this—I hope that it is not—but when the Saving Gateway Accounts Act 2009 was going through the House, and when he sat where I sit now, he said: 

“The Bill serves a valuable purpose in encouraging people, particularly those on low incomes, to save. People on higher incomes have an opportunity to smooth out fluctuations in income and expenses to which those on low incomes do not have access. If the Bill is successful in encouraging people to save, it will enable them to create a modest buffer against variations in income, such as the unexpected expense of being laid-off for a short period. It will give people a degree of financial security they have not had hitherto.” 

That is what the Minister said more than 18 months ago. At that time, the official Opposition did not oppose the Bill, but supported it; they recognised that it had some merits and they sanctioned the carrying out of pilots. 

Column number: 233 

For the benefit of the hon. Member for Birmingham, Yardley, who takes an interest in these matters as a member of the coalition, I will quote the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne), who spoke for the Liberal Democrats on Third Reading of the then Saving Gateway Accounts Bill. He said that 

“it is the equivalent of the share-owning democracy being extended to people in the bottom 10 to 20 per cent. of society. That will bring widespread social benefits if the Bill works out as successfully as we all hope.”—[Official Report, 25 February 2009; Vol. 488, c. 323-25.] 

Some 18 months ago, before the general election, the Liberal Democrats and the Conservatives were happy to support the principle of saving gateways, because they recognised—I do not wish to put words into their mouths—that contributions from the state to help poorer people to save were a good use of state resources to help generate income and ensure that those on lower incomes saved for their concerns at the time. 

On 26 October 2010, the Financial Secretary said: 

“I believe that people in Britain, including those on lower incomes, need to save more, and there was evidence from the saving gateway pilots that matching was a popular and easily understood incentive to save, but”— 

this is the crucial point— 

“when we looked at the proposal ahead of the Budget, it was clear that this would have been exactly the wrong time to introduce a new scheme that would have cost us up to £115 million a year.”—[Official Report, 26 October 2010; Vol. 517, c. 206.] 

Basically, the Financial Secretary believed it was a good scheme and that the pilots worked. He supported it in opposition, but budgetary constraints of £115 million a year mean that he does not now wish to proceed with it. 

I will give the Financial Secretary the opportunity not to proceed in that way now, so that he can have the next three years to reconsider. He does not need to do it immediately. He would not need to repeal the Act or scrap the scheme, but he could reconsider it over the next three years. At any point during that time, when the economy picks up, he can introduce the scheme and adjust the costs accordingly. If he believes in it, why is he abolishing it? Why is he not just taking the payment holiday that the amendment would give him? 

As a good judge of what is right and what is wrong, my hon. Friend the Member for West Ham keeps me on a fair track on these matters. I know that she and other members of the Committee would say to me, as the Opposition spokesman, “Go ahead with the scheme now.” That is my favoured option and, for the avoidance of doubt, if the amendment is not agreed, I will ask my hon. Friends to vote against clause stand part in due course. My favoured option would ensure that we do not wreck a lot of work on the saving gateway, that we do not throw out the pilots that we have had, that we do not waste those opportunities, and that we do not let the Financial Secretary stand on his head again by saying one thing in opposition and another in government. 

The hon. Member for Bristol West is in the Committee Room at the moment. When he was outside, I said to his hon. Friend the hon. Member for Birmingham, Yardley, that the Liberal Democrats supported the then Saving Gateway Accounts Bill on Second Reading. Their spokesman in opposition, the hon. Member for Taunton

Column number: 234 
Deane, supported it and said that it was a good thing. He wished it well and urged that the pilots be made a success. I looked forward to his supporting that policy during the election, and he made no manifesto commitment to abolish the saving gateway. The Financial Secretary did not do so either, but the amendment would give him the chance to look at the economic situation, to put the roll-out of the pilots on hold for whatever period of time he feels it necessary to do so, and to bank whatever savings he wishes. He could do that without our having to think again, in 2014, that this was a good idea, which should have been taken forward, and without the whole of the legislation having to be revisited and looked at again in detail. 

The Financial Secretary will know that the saving gateway was to be a tax-free cash savings account for working people on lower incomes, with eligibility passported from receipt of certain benefits and tax credits. Under the saving gateway, accounts would have lasted for two years. At their maturity, the Government would have made a contribution of 50p for each pound saved, up to a maximum of £300. We would be encouraging poorer people on lower incomes and on certain benefits, with strict eligibility, to put some money aside for their future. Let us encourage people on lower incomes to save in partnership with the Government, by putting in at the end of that process—not at the start or in the middle—50p for each pound saved, up to a maximum of £300. 

6.15 pm 

A savings culture is important. We need to ensure that not only those with trust funds from their families, not only those who are wealthy millionaires or just the well-off in society, but those who are poorer save towards their future. A proven method was used. The pilots showed that it was important that people could save and have independence and security throughout their lives. The then Government introduced individual savings accounts to develop a fairer distribution of tax relief, but the objective of the saving gateway was simple. It was first to kick-start a savings habit among people on lower incomes by providing a strong incentive to save through matching Government contributions. Secondly, it was to promote financial inclusion by encouraging people to engage with mainstream financial services—something that had cross-party agreement. 

Such a scheme was good. It was positive. Will the Minister tell me first and foremost whether he still believes that the scheme is good? Let us put aside for one moment the £150 million a year that he has estimated it will cost this year, next year and the year after. Does he believe that the scheme is a good thing? If he does, I urge him to accept the amendment. Again, we are making some sacrifices. We should have started the scheme in July this year. That has now not proved possible because the current Government have wrecked the proposal. I am willing to reflect on our amendment in order to save the scheme. Let us look at matters when the economy picks up. Let us look at whether the Minister actually believes what he said in February 2009, and let us see whether the Liberal Democrats believe what they said in February 2009. 

For the benefit of those in Committee who are not aware of such matters, the saving gateway pilots were delivered in partnership with the then Department for

Column number: 235 
Education and Skills and the Halifax, now HBOS plc, to provide banking facilities. The first pilots ran from August 2002 to November 2004 with individual accounts open for an 18-month period, and about 1,500 participants took part. The initial pilot covered five areas. It ran in Cambridge, east London—part of which my hon. Friend the Member for West Ham represents—and the city of Hull, a fine city, although it has great poverty. I went to university there and I know it well. My right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), the shadow Chancellor, represents a seat in that area. The county of Cumbria was another area, as was the city of Manchester, which is close to the constituency of my hon. Friend the Member for Stretford and Urmston. 

People living in those areas were eligible to open an account if they were of working age between 16 and 65 and if they fulfilled three particular criteria: they formed a household earning less than £15,000 a year; they earned less than £11,000 a year, or they received out-of-work benefits or benefits generally. Individuals could save up to £25 a month under the saving gateway pilot and up to a maximum of £375 overall, for which they received a pound-for-pound match when the account matured. The final evaluation of the first pilot was published in March 2005. 

I accept that the Minister will undoubtedly make great play of the fact that the Labour Government took a while to get the scheme up and running. Hands up on that one. It was much slower than we wished, but then the initial pilot was in place. It ran and we did the first evaluation in March 2005. That led to the second, larger saving gateway pilot, which ran in the same five locations of Cambridge, east London, Hull, Cumbria and Manchester and was also piloted in the additional area of South Yorkshire. That pilot started in 2005. Accounts were open for 18 months, as under the first pilot, and about 22,000 accounts were opened. That was a success. Twenty-two thousand accounts were opened, which would not have existed before, by people on low incomes who had not been saving. 

The second pilot was open to a wider income group in order to see whether we could extend demand in due course. Individuals in the second pilot were of working age—16 to 65—and had household incomes of less than £50,000 a year or individual incomes of less than £25,000 a year, or were, as before, out of work or receiving benefits. 

I welcome the Minister’s view on the success of the pilots. Although I am sure that he will give it, I ask him formally: does he think that the pilots were a success? I think that they pointed to a success in matching a targeted incentive to lower-income savers. The pilots’ key findings were that the saving gateway generated both new savers and new saving among existing savers and brought individuals into contact with mainstream financial institutions, often for the first time in their lives. 

The research showed that 60% of participants were still saving regularly two years after the pilot ended and that three in 10 participants who had not saved regularly before taking part in the pilot were doing so at the time of the further research. Participants were also positive about the saving gateway: 98% of people who took part in the pilots said that they would open another saving gateway account if given the chance, and 99% would

Column number: 236 
recommend it to a friend. I emphasise that people who were not saving before and were on low incomes saved money, and 99% said that they would recommend the scheme to a friend. That shows that the pilot was successful in its objective of encouraging people on lower incomes to save. 

My right hon. Friend the Member for Edinburgh South West, then the Chancellor of the Exchequer, announced in the Budget on 24 March this year that the first saving gateway accounts would be available in July 2010 and that Lloyds Banking Group, Post Office and the Royal Bank of Scotland Group intended to offer the accounts in 2010. The Government also expected at the time that several credit unions would offer the accounts, and continued to discuss the saving gateway with potential providers. The point about the credit unions is particularly important to my hon. Friend the Member for South Down, because as we heard in earlier evidence—and, I think, as she said herself—credit unions are a preferred method of saving in Northern Ireland, and they could and should take up the slack where the major banks that I mentioned could not offer the accounts. 

A key feature of the saving gateway is the fund matching element; the Government offered a contribution for each £1 saved. The pilots showed that that provided a simple, transparent and easily understood incentive to save. Building on that, the Government recognised the need for a wider section of society to develop the savings habit earlier in life. The Budget 2010 announced that the Government would explore options for widening access to matched savings accounts, with the potential addition of more support by the end of this Parliament. 

Obviously, things have changed, and we are no longer the Government, but the principle was accepted by the Opposition and the Liberal Democrats as a good thing. The only problem now appears to be the fact that it will cost £150 million a year. Again, I accept that it might be the Minister’s choice to make those on lower incomes the issue when it comes to funding the deficit reduction plan, but I cannot see why he will not accept the amendment and offer the payment holiday. 

It is difficult for me to propose such an amendment, because we were looking forward to the beginning of the scheme in July this year, but the Minister has the chance to say that he will maintain the Act on the statute book and reflect on it over the next three years. At any point in that three-year period, he can introduce amendments that start the scheme in July, as initially planned. He can commence it in 2011, 2012 or 2013; indeed, in 2014, at the end of the three-year period, he can consider whether to pass another measure to defer the scheme for another year or bring it on board. 

If the Minister believed that the scheme was a good thing when it was introduced in 2009, and if his only objection now is the cost, the amendment will give him a chance to put the cost aside and not roll out the scheme, while maintaining the principle of it so that at some point, the cross-party co-operation on this issue among the Liberals, the previous Government and him could come into play. 

The saving gateway account is open for those on income support, jobseeker’s allowance, incapacity benefit, employment support allowance, severe disability allowance, carer’s allowance or tax credits. There will be a lot more people on jobseeker’s allowance in the near future due

Column number: 237 
to the Government’s policies, and many more people wishing to save for the future. Incapacity benefit changes are in play, and I accept that, but we need to look at the issues. The basic principle is there: there is a scheme in place, which could provide a vehicle, that does not need the £150 million the Minister mentioned. 

I remind the Minister that he said on 25 February 2009: 

“Some might argue that the Bill is a distraction from the economic and financial crisis that the country is facing, but we also need to bear in mind that one in three households in this country have no savings and no cushion against being laid off, or are facing wage cuts or an end to overtime. This Bill serves a valuable purpose in encouraging people, particularly those on low incomes, to save… It will give people a degree of financial security that they have not had hitherto.”—[Official Report, 25 February 2009; Vol. 488, c. 322-3.] 

If he scraps the saving gateway today and continues with clause 2(1)— 

“The Saving Gateway Account Act 2009 is repealed.”— 

he is not giving people the 

“degree of financial security that they have not had hitherto”. 

Not for the first time on this Committee or on this topic, the Minister is standing on its head what he said was the right thing to do before the election. 

Perhaps there is a coalition agreement to abolish the child trust fund and the saving gateway. Perhaps the Minister has accepted that the hon. Members for Bristol West and for Birmingham, Yardley could cause them to be abolished. He stood on his head to save money and to agree the coalition agreement. There is no coalition agreement to abolish the saving gateway; there is no agreement by the Liberals or the Minister—both supported it. I am offering him the chance to save the £150 million next year, and I will, undoubtedly, be told off by colleagues for doing so, but I am offering him that opportunity. He should accept it and take it without destroying what was a universally accepted and agreed scheme. 

On 25 February 2009, the Minister also said: 

“As the Economic Secretary said, there is broad support for the Bill. —[Official Report, 25 February 2009; Vol. 488, c. 322.] 

I hope that the Minister can do us the courtesy of telling us whether he thinks that the Bill and the words he used in February were nonsense. Did he say them to get himself through the election and to prove that he was not part of the nasty party any more, because it had changed and was concerned about savings and poor people having an opportunity to save? If that is the case, perhaps he could say so today, but if, as I hope, he believed what he said at the time and thought that the saving gateway was a good thing, and, with the Liberal Democrats, believed that it was a mechanism to encourage saving, to allow contributions from the state to poorer people and to have the partnership that we have talked about throughout our proceedings, will he reflect on that and accept the amendment, and not emasculate the Saving Gateway Accounts Act 2009, but reconsider it when the economic situation improves in future? 

Before I finish, I would like the Minister’s view on my, perhaps wrong, reading of the current Budget proposals and the previous Budget proposals. The question I ask might make me look foolish, but it is important to ask it anyway. The March 2009 Labour Budget, “Table A1: Budget 2010 policy decisions”, says that the saving gateway funding spend was £10 million for 2010-11,

Column number: 238 
zero for 2011-12 and 2012-13, and that the net index in 2010-11 was £10 million. That is in column 21 of the Red Book for the Labour Government’s Budget. In the Budget policy decisions, part of June’s Conservative Budget, item 28 on page 40 says: 

“Savings gateway: not introduce in July 2010”. 

However, it says that the savings in 2010 will be £10 million. That tallies with the Labour Government proposal—savings of £10 million. Savings in 2011-12 are down as zero, which again tallies with the Labour Government proposal. Savings in 2012-13 are £75 million. Savings for 2012-13 under the Labour Government proposal were zero. I would like to know where that £75 million of savings has come from. 

6.30 pm 

Now, it might be a foolish question—I do not know the answer to it. It is always good practice to know the answer to questions that one raises, but I want to get that on the record, just so that we can have the Minister talk to us about that particular issue. 

For the moment, as I read this year’s Labour Government proposal and this year’s Conservative Government proposal, the costs in 2011-12 are zero to the Exchequer. Now, if there is zero cost to the Exchequer in 2011-12, why not accept the amendment not to remove the saving gateway now? Why not allow the scheme to develop and, if it is appropriate, pull it next year? 

This is an opportunity for the Minister to reflect on all those issues. I would like him to justify to the Committee why he thinks that the saving gateway, which he supported in Opposition, is such a bad idea, which did not do “what it said on the tin” and did not generate savings. Why does he think he cannot accept a situation that allows him to reflect on that still further, at no cost to the Exchequer? 

I look forward to the Minister’s accepting the amendment or at least adopting a reasoned approach and saying why he cannot accept it. 

Mr Hoban:  Let me be clear at the outset. As I said on Second Reading, I support the aims that lie behind the saving gateway. The right hon. Gentleman quoted at length from my speech when the original debate took place and I do not back away from those words at all. Also, I recognise the attraction of matching as a means of encouraging savings. There is quite a lively debate in the pensions and savings world about that issue. 

However, we have also been absolutely clear that we will not launch a saving gateway scheme during this Parliament, and there are two principal reasons for that. The first is that the scheme would cost more than £300 million during the next five years and in the context of the deficit that we face, it is unavoidable that we have to cancel this scheme. 

The right hon. Gentleman talked about the gap between what was in the Budget document this year and what was in the previous Government’s Budget document. I think that he will find that the cost of the saving gateway scheme was score-carded in an earlier Budget by the right hon. Member for Edinburgh South West (Mr Darling), the former Chancellor. 

I also have other concerns. The right hon. Gentleman touched on those when he talked about the comments of the former Chancellor, about who would offer these

Column number: 239 
accounts, because clearly there was not going to be widespread and significant coverage. Adrian Coles, the director-general of the Building Societies Association, said in the evidence session: 

“No building society had committed to offer a savings gateway”.––[Official Report, Savings Account s and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 34, Q98.] 

Eric Leenders, the executive director at the British Bankers Association, said of the banks that 

“there were only a couple of providers who felt that it was suitably beneficial for them to provide the account”. ––[Official Report, Savings Account s and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 34, Q98.] 

The Post Office said that it would do it only if there was going to be taxpayer subsidy to enable it to do so. I do not therefore think that that was a very satisfactory base on which to offer the savings gateway account. 

Yvonne Fovargue (Makerfield) (Lab):  Does the Financial Secretary accept that the institutions that he has missed out are the credit unions, which operate in the majority of applicable areas, particularly those with low-income consumers, and that would have provided not only a means for the savers to save in the credit unions, but the credit unions with a means to expand their reach and expand into more areas? 

Mr Hoban:  The hon. Lady makes an important point and I am sure that if I spoke to a credit union and I asked it how best to deliver support to it, it might not suggest that the saving gateway account was the most effective or efficient way of doing that. 

Kerry McCarthy (Bristol East) (Lab):  If the Minister had been here when the Association of British Credit Unions Ltd gave evidence last week, he would have had an opportunity to question the credit union movement. He would have found that it was enthusiastic and looking forward to the saving gateway being rolled out, and disappointed that it will not happen. 

Mr Hoban:  I have spoken to the credit union movement on the subject on a number of occasions, so I understand its enthusiasm, but there are more effective ways of helping credit unions than this expensive scheme. The £10 million mentioned in the 2010 Budget was the cost of rolling the scheme out to post offices; the scorecard cost was from 2008. 

The evidence is mixed. It is not entirely clear that the saving gateway account would have added to savings. On that basis, and given the fiscal position that the country faces, it is not appropriate to continue with the programme, and I expressed those concerns during the debate on the saving gateway account. Indeed, before the second pilot, questions were raised about whether the scheme would be effective in meeting the objective of increasing savings. There was no statistically significant evidence that, in delivering genuine net savings, the saving gateway account would still deliver higher net worth. The evidence is uncertain. Carl Emmerson of the IFS made the same point. 

The evidence base is not as strong as it could be. In principle, the scheme is a good idea, but given the current economic constraints, it would not be an appropriate use of taxpayers’ money to pursue it. It is better to have

Column number: 240 
clarity about the Government’s intention. We do not intend to roll it out in this Parliament. It is best that the measure is removed from the statute book, and that is the purpose of clause 2. It provides absolute clarity to all who are interested that the Government do not intend to pursue it. Anyone who came forward with a scheme at a later date might wish to redesign it completely, so there is no benefit in keeping it on the statute book. 

Claire Perry (Devizes) (Con):  The hon. Member for Bristol East made an important point about the credit unions. It was an extremely interesting evidence session, and I know that the Minister has read the evidence. I draw his attention to question 149, when I asked Mark Lyonette, the chairman of ABCUL, for his assessment of how the most impoverished families could increase savings. In response specifically to what we are doing with the post office, he said: 

“the channels issue is about how we make that step change. Compared with the scale of Government support in the past four years, it is a much easier and better value thing to do”— 

that is rolling out the post office network— 

“than to keep doing the same or to salami slice what is already happening.”––[Official Report, Savings Accounts and H ealth in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 51, Q149.] 

Does the Minister agree that the bold moves that we are undertaking, particularly in rolling out the post office channel, is a way to help our most disadvantaged families gain access to financial services? 

Mr Hoban:  My hon. Friend makes an important point. We need to think carefully about when to give support for tackling financial inclusion, and where we might get the maximum benefit from that support. The role of the post office is important, and discussions are ongoing about whether the credit unions could access the post office network. 


Kerry McCarthy:  We have been in Committee for much of the day and have not had much of a chance to catch up with the news, but I was in my office for a brief period and I understand that the Government have pulled the plug on any concept of the Post Office bank going ahead on the ground that it was too expensive. Is the Minister aware of that announcement? 

Mr Hoban:  There are clearly a number of ways in which we can encourage people to make greater use of the post office network, and I know that the post office will offer greater service, acting as a conduit and allowing customers of other banks to use it for transactions. That has already happened in a number of cases. The credit unions have put forward a proposal to use the post office infrastructure to help the growth of their business. We are looking a range of activities that could strengthen the post office network. It is important when tackling financial inclusion to increase the number of access points. One problem with that project is that there would clearly not be enough access points. That was one reason why we chose to end it. 

Although we support the principle of the savings gateway, there is insufficient evidence to show that it would have been effective. There was clearly a problem with the network of outlets for the savings gateway. It is

Column number: 241 
on that basis that we chose to scrap it. The money that we are saving will help tackle the deficit, which is the most pressing priority facing the people of this country today. This is the right thing to do. 

Sheila Gilmore:  Once again, we are making the mistake of moving too quickly to abolish something that many people have said would have been a good thing in principle—even the Minister said that again just now. Why is it necessary at this point to do away with the proposition that we could have had, to put the scheme on ice—although I would much rather see it start to operate? 

In the event, we would have been in a position to incentivise people on very low incomes to save—they will not be incentivised by tax schemes because they do not pay tax, which was the particular reason for a matching scheme. We do not want to reinvent it, to re-legislate and to set up again everything that went into the legislation—we saw how long it took from when the legislation went through in 2009 until the point in 2010 when it was about to come into force. Why is it necessary to do away with it, unless it is not actually a good thing—although that has not been clear from what the Minister has said? 

There is so much ambiguity in what is being said. On the one hand, changes of this sort are presented as being an economic necessity—they have to be done because of the deficit. On the other, there is a lot of criticism of the proposed scheme itself—it is not necessarily the best way to help people to save, and we can help credit unions in some other way, although unspecified. 

The clear evidence of the credit unions to the Committee was that the scheme was by no means the only way in which people could save. Equally, however, the representatives of the credit unions said that it was an important means of doing so. It was one way in which the business could be built up. People could be incentivised to save and put in contact with credit unions, some perhaps having not been in such contact before. In so doing, those people would become eligible for cheaper loans on a short-term basis, if needed to face a crisis. By making contact with a credit union, they would be open to getting advice and assistance that they might not have sought before, which, in turn, would also help them with their wider financial problems. As a means of helping people not just save but actually get in touch with cheaper forms of credit and financial advice, that important vehicle enabled that to happen. 

If credit unions do not have enough outlets, one of the things under discussion—I hope still under discussion—is the suggestion that they might be able to operate in partnership with post offices. That would give people another means of getting in contact with credit unions, which would be a good thing. The lack of it having happened prior to July 2010 does not seem to be a reason for not going ahead with such a proposal. If the scheme had gone ahead and people had started to use it, that would have been an opportunity to widen provision and would have strengthened the case for that link with the Post Office. 

Sometimes we have to get going with proposals and new initiatives, and to get them properly on the ground, before they ever work. If we keep waiting for the right

Column number: 242 
time or for sufficient evidence that enough people will save, we might wait for ever. People need to see their friends and neighbours and the people in their community being enabled to save in this way—one of the biggest ways that people are helped, initially at least, to make contact with organisations such as the credit unions is through word of mouth. If people see their friends and neighbours and the people they work with becoming involved, they are likely to want to take up that option as well. 

Alison McGovern:  On that very point of Post Office involvement and how the scheme might have linked in with a greater role for the Post Office, would the hon. Lady agree with the National Pensioners Convention, which said about the Government’s announcement on the Post Office today that the decision not to have a Post Office bank was extremely short-sighted and would put the future of the post office network in jeopardy? 

The Chair:  Order. The hon. Lady makes an interesting point, but I am not sure how it relates to clause 2. 

6.45 pm 

Sheila Gilmore:  I certainly agree with my hon. Friend that it is regrettable that the idea of a Post Office bank seems to have gone the way of many other proposals. I hope that the proposals on partnerships between credit unions and post offices will not go the same way because, regardless of whether there is the saving gateway or not, such partnerships would immensely benefit both credit unions and local communities. 

My point about the second pilot was that although there was evidence that some people who had saved in this manner would have saved otherwise, that generally related to people on higher incomes. The second part of the saving gateway spanned a broad level of income, which the proposal in the Act would not—a much more limited scheme was legislated on. The people on the lowest incomes and on benefits who were in that saving gateway pilot were the very people who did save when they had previously not saved, albeit the amounts were small. As was much discussed in the evidence given by various people to the Committee, small savings can make a tremendous difference to people’s financial position and to their ability to weather the storms that they come across. 

Is the Minister saying that the scheme is such a thoroughly bad idea that it should not be reopened at a future date without having to go through a legislative process? If that is the case, it means starting again from scratch with all the paraphernalia of legislation. That is absolutely not necessary. I still fundamentally believe that it is regrettable even to suggest putting the scheme on ice because, in such a difficult time, people are experiencing greater financial difficulty, and I suspect that many will go to much less creditable places to get loans. 

Mr Hanson:  May I confirm for my hon. Friend that when I said that putting the scheme on ice was not the preferred option, in fact I hoped that even the three-year gap that we have now suggested could, in fact, be a six-month gap. The simple objective is to avoid the cancellation that clause 2 currently provides for. 

Column number: 243 

Sheila Gilmore:  I thank my right hon. Friend for clarifying the position that he was putting forward. This is a particularly difficult time not just for the country, but for people on low incomes. Unemployment has risen and hours of work have shrunk. People are struggling to keep going. The evidence given to the Committee from various witnesses demonstrated that if people can be assisted to make some financial provision during the times when they have a bit more income, they will be in a stronger position to be resilient when they perhaps lose their job or are asked to go on to short time or experience any of the other financial difficulties that could arise. 

If people do not make such a provision and they find themselves in difficulties, they might have to get more deeply into debt. That will significantly worsen their position. In the end, in many ways, the costs will have to be picked up by the taxpayer regardless, because more people may have to seek crisis loans through the DWP or people will get into such difficulty with their finances that they will not only take out loans, but end up in rent arrears, lose their homes and have to be re-housed in temporary accommodation. Those people will make even greater calls on the taxpayer in due course. 

Small-scale schemes that help people’s financial resilience may, in fact, be a saving to the taxpayer, rather than being in any way a drain. In some ways, this measure is one of the most important parts of the three proposals in the Bill. If I were asked to pick one of these to save, it would be this one in particular, because it is so important to such a wide range of communities. That said, I am unhappy to see any of them going. If it has to go into abeyance in the meantime, at least we would have the structure to pick it up again. If the Government are correct, we should be in a position in due course to see things improving and, at that point, perhaps even the Government will be prepared to pick up the scheme again. I urge the Minister to accept the amendment. 

Yvonne Fovargue:  I want to comment on the message that the abolition of this scheme would send to two groups of people. First of all, consider the message to the small savers. People want to save and the success of savings companies such as Farepak proves that. They do not, however, always save in the right places. For me, the saving gateway steered people to organisations that they trusted and were in the community, like credit unions. It stopped unscrupulous organisations taking advantage of them. It was said in the evidence that it was the distance from organisations that stopped people saving. Often, it comes down to how far people have to walk. In my local community of Makerfield, they do not have to walk that far to get to a credit union. A savings gateway would have given people the nudge that Mark Lyonette, the president of ABCUL, said was so important to start people saving. There was a lot of discussion about whether the saving is simply about moving money from one place to another. I make no apology for saying that if people are ceasing to pay phenomenal amounts of interest and phenomenal amounts for goods to organisations such as BrightHouse, because they have no savings, I for one will be grateful. 

The other message is to the institutions. The credit unions said that they were concerned that that they would find it difficult to trust Government schemes in the future, given the withdrawal of the original scheme

Column number: 244 
at such short notice. By freezing the scheme—I would still like to see it go ahead—the message to the organisations that have planned for it is that it will happen in the future, that they have not wasted their time and that their business planning did have a purpose. In my area, the credit unions are fragile. They do not get a lot of money in and this scheme was important to them in expanding, as was the growth fund produced by the previous Government, which gave them a tremendous boost. A small amount of money gives an organisation such as a credit union a tremendous boost. 

I support the idea of placing the saving gateway with the credit unions because of the unions’ reach into the community, their ability to touch those who are financially excluded and their work to combat financial inclusion. Although it is not their primary purpose, we have heard that 500 credit unions already run financial inclusion schemes, working with the people who invest with them. We could build on that and assist people so that they do not get into debt and so that they do not go to organisations that take advantage of them. The saving gateway would have assisted in encouraging the small savers—giving them that nudge—to start saving with a reputable organisation. It would also help those organisations to expand their reach and to assist people by giving them the advice that they need at a particular time of their life. I suggest that we do not abolish the saving gateway. We should keep it on the books so that we can return to it. It is a scheme that was welcomed by everyone—do not send the message that it will not come back. 

The Chair:  First, I want to alert the Committee to the fact that my intentions, should the Committee reach clause 3 tonight, is to revisit my amendment selection and to select, in a single group, amendments 48, 50, 52, 46, 44, 49, 51, 53, 47 and 45. Those will be taken before the debate on amendment 42. I will arrange for a revised list to be issued when the Committee resumes. I gather that there is an intention for the Committee to sit later into the evening. It is customary in that case for a period of suspension for dinner. 

6.55 pm 

Sitting suspended.  

8 pm 

On resuming—  

Mr Hanson:  We have had an interesting debate so far on amendment 38, and I am grateful for the contributions of my hon. Friends the Members for Makerfield and for Edinburgh East in today’s discussions. I feel sure that my hon. Friends will wish to make further contributions to continue the discussion on the amendment. 

To remind the Committee, because it is important to do so, the amendment would insert 

“with effect from 1st January 2014” 

at the end of line 10 on page 2. The purpose of the amendment is to ensure that we give the Minister an opportunity not to scrap the Saving Gateway Accounts Act 2009 from now, but to reflect on whether there is a pressing need for the Act to be retained on the statute book, and for it to be potentially examined at any time up to 2014; 1 January 2014 is the appointed date. I hope that by then the economy will have picked up, and the

Column number: 245 
benefits of the scheme, which the Minister espoused in opposition, will become even clearer to him. 

We have had a useful debate, but some issues relating to the amendment still need to be teased out. First, I refer to the Committee’s evidence session, when my hon. Friend the Member for Bristol East asked the representative from the Association of British Credit Unions, Mr Mark Lyonette, some questions about the importance of the saving gateway scheme. She asked him what his experience was of the saving gateway pilots, and I am grateful for her help in raising those issues. She asked: 

“Do you think they have been successful and something that, in an ideal world, would be rolled out further?” 

Amendment 38 would give the Government the opportunity not to cancel, scrap or end the saving gateway pilots, but to continue to ask whether they should be rolled out at any time between now and 1 January 2014—or indeed after that. It would also give the Minister an opportunity to reflect on the success of the scheme. Mr Lyonette said at the time: 

“We were very supportive of the saving gateway for a comparatively small sector—just 900,000 people…We were very supportive of the saving gateway all along, and one of the challenges for our sector, with both any future junior ISA or future saving gateway, will be persuading our members. Even the largest members, which are bigger than the smallest building societies, are still small businesses.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 48, Q141.] 

Basically, he is saying that in the event of the gateway being scrapped, any potential future replacement, whatever it is, will be difficult to implement. 

My hon. Friend continued: 

“You say that your members were enthusiastic about moving forward with the saving gateway.” 

Mr Lyonette responded in the evidence session, which is important in relation to this amendment, by saying: 

“Yes, we supported and followed most of the thinking on it. We did consistently tell the Treasury that we thought some things about it were slightly counter-intuitive. One was the two-year cycle”. 

Let us look at the two-year cycle. The amendment to delay the abolition until 1 January 2014 would give the Minister the chance to examine the evidence provided by Mr Lyonette to the Committee. He said that he was concerned about the two-year cycle, and continued, 

“in our experience, there is not much that happens in anyone’s life on a two-year cycle. We always said that that just does not seem right.” 

The Minister has an opportunity to reflect on that evidence now—not to scrap the scheme, but to use the three-year gap to look at whether we can have a more in-tune cycle along the lines that Mr Lyonette suggested, which is that people save a high proportion of their income for Christmas. He said, citing his comments to the Treasury: 

“‘We know that in our sector people will save for a year, withdraw the money in November, have Christmas and do the same the following year.’ That would have fitted within the saving gateway, but the two-year feature seemed counter-intuitive.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 48, Q142.] 

Column number: 246 

I am giving the Minister the chance to respond to that, to look at reducing the two years to one year, to use the three-year hiatus that I propose in the scheme to consider the representations, and to look at the issue in detail so that we can build on the success of a scheme that the Minister supported in opposition, as did his Liberal friends, and never criticised until he received a Government position. 

Kate Green:  Does my right hon. Friend agree that Mr Lyonette’s evidence was interesting because he emphasised the enthusiasm of the credit union sector for participating in and improving the product? The sector is small and fragile, however, and obviously cannot cope with policy chopping and changing in the way that perhaps larger financial institutions can. Does my right hon. Friend agree that freezing a structure within which the credit union movement has become comfortable working would be welcomed by the sector, because it would not feel that it had invested a great deal of time and capital and that it had all been thrown away? 

Mr Hanson:  Indeed. The evidence from the credit union sector on the Bill was very clear: the saving gateway pilots were successful and important, and they generated sufficient support and did a reasonable job. 

Yvonne Fovargue:  Does my right hon. Friend agree that having the opportunity to consider linking in with other annual schemes, for example the “Save Xmas” campaign, would perhaps assist both the credit unions and small savers, and that the freeze would provide an opportunity to look at a more natural cycle? 

Mr Hanson:  Indeed. My hon. Friend’s predecessor in her constituency of Makerfield, Sir Ian McCartney, was one of the prime movers in tackling the Farepak crisis. He recognised that the crisis had a great impact in the towns and communities of Makerfield, and I shall certainly return to my hon. Friend’s points in a moment. It is extremely important that we look at the issues in the round. 

My hon. Friend the Member for Edinburgh East, in questions to Mr Lyonette in the evidence session, made some important points about the need for savings, and for savings for people on low incomes. It was mentioned that there should be a real balance in relation to the saving gateway as a source of saving, and my hon. Friend said to Mr Mark Lyonette: 

“It would have helped contribute towards that.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 18, Q45.] 

He said one word in response: “Absolutely.” There is a clear indication from the evidence we have seen that the saving gateway and health account would have been a success. The pilots were positive, and achieved the objective that my hon. Friend the Member for Stretford and Urmston indicated. 

Kate Green:  Does not my right hon. Friend also agree that one thing that Mr Lyonette was perhaps hinting at was that credit unions will want a diverse but secure source of funding for their deposit base, and that the saving gateway, because of the matched element that was coming from Government and which therefore

Column number: 247 
drew people in and kept them with the savings programme—a crucial bit of evidence that we heard from our witnesses last week—was a much more stable source of capital funding for credit unions and therefore an important part of their funding mix? 

Mr Hanson:  That is an extremely valid point. Mr Lyonette is about defending credit unions, and I accept that that is his business as representative of his organisation. He said that he believes that the scheme provides a good mechanism for securing savings for poorer people, and gives stability because people are undertaking this in a positive way. 

The crucial point in the evidence in relation to my amendment, the purpose of which is to give the Government thinking time of three years before abolition, was when I asked Mr Lyonette: 

“You said that you were planning the saving gateway on the basis of cross-party support. Do you have evidence for that assertion?” 

Mr Lyonette replied: 

“We did not have any reason to think otherwise. We certainly were not thinking during the election that something that had developed so far would be pulled. We understand the financial situation, but pulling it for financial reasons would be the only reason. We did not foresee there being another reason to pull the product.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 55, Q154.] 

Alison McGovern:  On the saving gateway, the delay and the timings, I am aware of several all-party groups and various mechanisms whereby the credit unions might have conversations with us politicians. Does my right hon. Friend not think that it is likely that the credit unions would have had such conversations about the future? 

Mr Hanson:  I would hope so. My hon. Friend’s point is, again, that this has been rushed. Whatever mechanisms the Minister is introducing, the general election was just over six months ago, the proposal was announced in the Budget, the roll-out of the pilot was scrapped in July and now we are abolishing the legislation completely in clause 2. My amendment would give him time to reflect on the impact of that and on the representations that have been put to him in Committee and elsewhere. 

I have secured some comments in just the past hour by considering the matter carefully. The Daily Telegraph says in a headline: 

“Savers ignored in the Budget as new scheme scrapped”. 

I read the Telegraph most days, but I do not often subscribe to its political views. The article was written by Myra Butterworth, personal finance correspondent, in June 2010. 

I would have thought that one of Government’s great objectives was to encourage saving, and they can do so through a range of measures. The Minister has now scrapped the scheme, and the Telegraph says: 

“Savers have been ignored by the Chancellor as a scheme set up to encourage low earners is scrapped, experts said yesterday… Jason Riddle, co-founder of action group Save Our Savers, said: ‘Yesterday’s Emergency Budget was a crucial opportunity for the new Government to outline a clear set of policies to help savers, but instead it has become yet another missed chance for decisive action... If the UK is to lift itself out of its economic mire, it’s vital that the Government puts clear steps in place to re-establish a culture of saving.’” 

Column number: 248 

What better way to do that than by at least focusing on those who are not saving anything at the moment: the lowest, poorest people in society? There are people in many constituencies represented here who are on jobseeker’s allowance, incapacity benefit or other benefits or incomes of less than £15,000 a year and who were not saving but who, in the saving gateway pilot, developed a saving culture, joined the scheme and recommended it to their friends, as 99% did. 

The article continues: 

“Ros Altmann, a governor of the London School of Economics, said: ‘There are no new incentives’” 

in the Budget 

“‘to restore a savings culture’…Mike O’Connor, chief executive of Consumer Focus, said: ‘The Savings Gateway would have been a great opportunity for the Government to remove a barrier for people on low incomes getting on the savings ladder. This will be a disappointment for many potential savers and makes it even more important that the Government reforms financial services so that they better serve people who earn the least.’” 

I hold no brief for the chief executive of Consumer Focus, but he has said independently that the Bill will damage the saving culture, hit the poorest hardest and prevent people on low incomes from developing a saving culture. The website—there is a plug for it—says: 

“Failure –sending out the wrong message. To encourage you to save… in ordinary bank savings… a string of successive Governments have failed to take bold, decisive action”. 

Okay; I will take the criticism for us, but why is the Minister cancelling the scheme now? 

My hon. Friend the Member for Makerfield made some valuable points in her contribution. She helped open my eyes a little about the importance of maintaining the scheme or, by passing the amendment and not scrapping the scheme immediately, of giving the Minister three years to consider whether to scrap it or develop it still further. 

My hon. Friend the Member for Makerfield reminded me of the Farepak disaster that had an impact on her constituents and many other people. Hon. Members will remember that Farepak hampers were a way for individuals to save for Christmas through a scheme that, as my hon. Friend said, was extremely important. Farepak collapsed in 2006 causing much discomfort across the country, with many thousands of people losing their savings. There was no Government-organised saving scheme or saving gateway network for poor people, such as the scheme that would have been put in place for those on lower incomes and benefits. Because of that, the Farepak scheme was in place. Thousands of families saved with Farepak, believing that their money was safe in a scheme that was not underwritten by major companies such as HBOS, the Post Office or the Lloyds Bank Group, as this scheme would have been. People saved with what turned out to be a completely useless scheme that lost them lots of money.

8.15 pm 

My worry is not only about Farepak but loan sharks. My hon. Friend the Member for Walthamstow (Stella Creasy) has recently introduced a ten-minute Bill that looks at how we could encourage tightening regulation around such issues. That is valuable. If there is no scheme that encourages saving and matches that with a contribution, I worry that my constituents—as well as

Column number: 249 
those of the Minister and other hon. Members, particularly in the poorer parts of the UK—will save money in schemes that are not underwritten, are dangerous and could collapse leading to a loss of resources. Such people may also use unscrupulous lenders and savings accounts. 

People should be able to save in a scheme, have their savings matched and be prepared for the pressures of life that are felt by those on lower incomes—Christmas, birthdays, or emergencies—we can all think of examples. That is an important issue that the Minister will overlook when he scraps the scheme. 

Yvonne Fovargue:  Does my right hon. Friend agree that it is concerning that people are not saving, as well as that they may be saving in unregulated schemes? That might lead people to go to organisations that offer payday loans, for example, and lend at iniquitous rates of interest such as 2,760%. That leads people into a spiral of debt, which a small amount of savings could have prevented. 

Mr Hanson:  Absolutely. As my hon. Friend will know, I have had constituency experiences of such things as, I suspect, have most hon. Members if they have been in Parliament for a long time. They will have seen people who borrowed a small amount of money—£50, £60 or £70—from an unscrupulous lender, and because of that, they have to pay vast amounts of interest and are in hock. I know of an individual in a nearby constituency who recently went to prison to serve a long sentence. The Assets Recovery Agency has taken away his home because of his unscrupulous lending. Poor people in Runcorn, Widnes, Warrington, Cheshire, Chester and Liverpool—my part of the world on the English side of the border—were ripped off by unscrupulous lenders because of a small amount of money. 

If rolled out, this scheme would have ensured help and support for poorer people on low incomes, or no income at all, to help them save with support from the Government and ensure that should a crisis happen, they might have £100 in a savings account. At the end of the two-year period, as currently constituted, that account would have been matched by the Government and could have been a little more than the initial saving. That amount of money might have made the difference between facing a loan shark, and not having to do that; between someone losing their resources and finding themselves paying exorbitant rates of interest, and that not happening. That is why it is an important scheme. 

Kate Green:  Does my right hon. Friend agree that the emphasis rightly placed on financial education by the Minister would be more meaningful in the context that he described? There would be the sense of a strategy that people with savings in the saving gateway scheme could adopt to avoid becoming involved with loan sharks and high interest rates. Therefore, the education would not have been delivered to them in a vacuum, but with a sense of there being a genuine exit strategy for them. 

Mr Hanson:  Absolutely. The saving gateway pilots have shown that it has several benefits. First, it encourages people on low incomes or benefits to save. Secondly, it helps engender the savings culture to which my hon. Friend the Member for Stretford and Urmston has just

Column number: 250 
referred. Thirdly, it would help avoid having to rely on loan sharks or bad debt and, in the longer term, a partnership between the Government and the individual to help save would be a valuable scheme. I do not want the Committee just to take matters from me, but we are faced with the abolition of the scheme under the clause. The amendment would hold the abolition for three years and provide for the evidence to be reconsidered in detail. It does not want matters to be rushed, but for time to be devoted to such issues. 

An article written by Dalia Ben-Galim, the associate director of the Institute for Public Policy Research, earlier this year states: 

“It may be overlooked by many but the 2010 budget announced that the Saving Gateway has been deemed ‘unaffordable’ and so will not go ahead as planned. The Saving Gateway was a ground-breaking scheme designed to incentivise and reward saving among low-income families by providing a ‘match’ for each £1 saved. Rigorous pilots have shown that the Saving Gateway has been effective in increasing saving amongst low-income families.” 

Evidence from the IPPR’s consumer-spending and debt research showed that low-income families spend, save and borrow, that most families wanted to save and that many successfully saved for Christmas and birthdays because of the scheme. She cites an example, which is worth putting on the record, of a 33-year-old parent with two children who told the IPPR that she had not been one for long-term saving, but that she can now save for a purpose. 

According to the IPPR: 

“Families had often interpreted ‘saving’ as not spending and were able to juggle income and expenditure for a particular event. But most families did not manage to build up any ‘rainy day’ savings.” 

People on low incomes often do not have insurance, so when the crisis hits, the washing machine breaks down or there is a flood, they are driven into the hands of the loan shark and into debt, and, dare I say it, that debt sometimes drives them to crime. Those things are avoidable. The Minister needs to reflect on the benefits involved with the scheme, and he would have three years in which to do so if he accepts the amendment. 

Yvonne Fovargue:  Does my right hon. Friend agree that the psychological impact of having savings has not been fully taken into account? A delay might provide a chance to look at such matters, such as the feeling of control that having a small amount of money gives a family on a low income. We could widen that example and consider the feeling of being out of control and the psychological impact of debt that costs the country a large amount each year. 

Mr Hanson:  My hon. Friend speaks from experience of a constituency that will not be among those that have the top 100 income earners in the United Kingdom. I hope that she will accept that in the way that I meant it. Her constituency will no doubt have debt problems in several areas. I refer to the experience of the IPPR of a 46-year-old mother of two who said: 

“We have not been able to put any [money] in [to our savings]. We’re spending so much in the shops and supermarkets and on bills.” 

The IPPR said that that was a typical response that it had received. Its research concluded that 

“the lack of precautionary saving for low-income families leaves them more vulnerable to income and expenditure ‘shocks’” 

Column number: 251 

of the type that I mentioned earlier. It said that a number of families reported shocks of unexpected spending due to the breakdown of household items, such as a fridge, boiler, washing machine. It found: 

“While many were trying to save—for example, one family was trying to save their child benefit money…none had long-term savings”, 

because they were not able to have long-term savings because there was not a kick-start or indeed the match funding to help it. 

The IPPR stated that the 

“Saving Gateway provided a ‘match’ for savings—rather than tax relief”, 

which is no use to people on fixed unemployment benefit, fixed pension incomes or fixed incapacity benefit. That matching funding rather than tax relief benefited low earners most. It continued: 

“We already spend £1.6 billion on tax relief for ISAs (and almost £22 billion in total tax relief for savings.) The Saving Gateway would have cost” 

£115 million next year, the year after and the year after that. 

I expect my hon. Friend the Member for West Ham will chide me, but I am offering the Minister a chance to stop, reflect, reconstitute, look at the evidence, talk to some of the groups and reflect on what has been said in Committee. If he stops it for one year and brings it back the next, or perhaps looks at it in two years’ time, I will be happy. He could also consider the evidence from Mr Lyonette about the need to make the window a little tighter. The Minister could do all those things if he wished. 

Kate Green:  Does my right hon. Friend also agree that it would offer the opportunity to investigate a discrepancy in the evidence that we received from the witness from Toynbee Hall, who suggested that the level of contributions was a significant factor in the success of the product? That witness was quite wary of seeing the Government contribution reduced, whereas other witnesses thought that there was scope to reduce the Government contribution, therefore potentially making the product more affordable in the medium and long term. Does my hon. Friend agree that, given that there is a discrepancy even among expert witnesses who are committed to the product in terms of their attitude to the Government’s match funding, it would allow time to investigate properly that discrepancy and genuinely find the necessary and right level of Government contribution so that the product works effectively and is also cost-effective? 

The Chair:  Order. Before Mr Hanson responds, I have noticed recently that there is a tendency for interventions to turn into mini-speeches. May I suggest that members of the Committee bear that in mind before they make any interventions and that they keep them brief, perhaps to a single point? 

Mr Hanson:  I am grateful to my hon. Friend for her contribution. She makes some valid points. I simply ask the Minister to reflect on all those issues, because the three-year gap that we are proposing will not cost any money. That is the key thing. It will not cost the Minister a single penny. The pilots have ended. The scheme would cost £115 million this year, next year and the year after. If we do not progress the scheme and do

Column number: 252 
not scrap it, as in clause 2, we can use that three-year window to see whether the economy picks up and look at the issues we have raised and the representations made, and he can reflect on the manifesto commitments that he gave. All those things will mean that the Minister does not need to scrap it, and could, if I dare say so, scrap it after three years if he so chooses. It would not cost him a penny in the three-year gap in between. It will cost poor people £150 million worth of contributions, but it will not cost the Minister or the deficit a single penny. 

Harriett Baldwin:  It will cost the Treasury money, because it has to authorise the financial institutions. There was a list of those institutions and presumably we would have to keep checking that they were still okay to provide the product. 

Mr Hanson:  If the hon. Lady believes that the Post Office, Lloyds Bank and HBOS are going to be unsuitable organisations, it will not cost the Treasury a great deal of money to check on that. I could ask it to check on Google on the computer. It is possible to do that. I am not sure whether she has costed that. Perhaps she can tell me how much she believes it would cost to do a check on those three organisations. 

Harriett Baldwin:  I have no idea, but I know it is not zero, as the right hon. Gentleman suggests. 

Mr Hanson:  Perhaps the hon. Lady could go away and find out exactly how much that would cost. Even if there was a minimal cost, I do not think that it would take a great deal of resource to cost it. Remember, I am reluctantly and with some chiding from my hon. Friends, offering the Financial Secretary a £115 million saving in each of the next three years towards the deficit, without actually abolishing the saving gateway account. 

Let me move on and take one example of the impact of the abolition of the saving gateway on individuals not unadjacent to hon. Members in Committee today. Let us look at a particular aspect of jobseeker’s allowance. Under the current rules, an individual can open a saving gateway account if they get a number of benefits, including jobseeker’s allowance. Let us look at that allowance for a moment. Before we abolish the scheme, it is important that we recognise what one aspect would mean to our constituents next year, the year after and the year after that. I will start in alphabetical order with the hon. Member for Birmingham, Yardley, who has no mandate to abolish the scheme and whose Liberal Democrat colleagues previously supported it. He will find that from September 2010, 4,479 are currently on jobseeker’s allowance in his constituency. 

8.30 pm 

If the hon. Gentleman votes for clause 2 today, those people in his constituency will not be able to qualify for the saving gateway as of July, as initially planned, or at all, after Royal Assent. If he votes for my amendment—the three-year holiday, or it could be one or two years—those people could qualify for the scheme in 12 months’ time, because it would not be abolished until 1 January 2014, by which time, I hope, we will have convinced the Minister about the importance of the scheme’s success. 

Column number: 253 

If the amendment is not accepted, in Blackpool North and Cleveleys 1,937 people who are on jobseeker’s allowance would not benefit from the scheme as a result of its abolition. 

My hon. Friend the Member for Bristol East has 2,185 people in her constituency who are on jobseeker’s allowance. If she voted for the clause, those people would not be able to qualify for the saving gateway. I know—and my hon. Friend may want to reflect on this—that those people, who would potentially be beneficiaries of that scheme, could save toward Christmas, or their holidays, or in case of accidents. Accepting the amendment would provide the Minister with the chance to have three years’ reflection on such people. 

Kerry McCarthy:  I thank my right hon. Friend for revealing those enlightening statistics. I look forward to hearing the statistics on Bristol West, which, because of the boundary changes at the last election, has inherited the most deprived parts of the city, which were formerly in my constituency. It will be interesting to see whether they, too, will suffer as a result of the loss of that facility. 

Mr Hanson:  My hon. Friend invites me to talk about Bristol West. She knows that city well and is aware of the measure’s effect on it. She will know that there were 3,490 people on jobseeker’s allowance in September 2010, all of whom would have qualified for the saving gateway and the match funding had the Government continued with the scheme. They could have saved towards the things that we have talked about. I am sad to say that there has been a 1,300 increase in such people in Bristol West over the past five years. It is a key area of deprivation and the Minister—I apologise, I meant the hon. Member for Bristol West; he lives in hope, and now that he has sold his soul, anything can happen at the next reshuffle, particularly if he votes with the Government regularly. 

John Hemming:  Will the right hon. Gentleman give way? 

Mr Hanson:  Let me finish my point and then I will certainly do so. If the hon. Member for Bristol West, whose party supported the scheme when it was in opposition, votes against the amendment to delay the abolition, and on clause stand part, votes to abolish the scheme, he will deprive 3,490 people as of September 2010 in his constituency who are on jobseeker’s allowance, never mind those on income support, incapacity benefit, disability allowance, carer’s allowance and all those who are earning less than £16,000 a year. That applies only to jobseeker’s allowance; those are the only statistics that I have been able to garner in the past hour, but they illustrate the impact on people. The hon. Gentleman will deprive those people of the ability to participate in the saving gateway account. 

John Hemming:  I thank the shadow Minister for giving way on that interesting exposition of the various constituencies represented by members of the Committee. 

Mr Hanson:  There are more to come. 

John Hemming:  Does the right hon. Gentleman not accept, however, that if we do not take resolute and firm action to deal with the deficit, we will end up with a loss of control on sovereign debt interest rates? Potentially,

Column number: 254 
the country might go off to the International Monetary Fund and there will be much greater cuts, much higher unemployment, and many more people on that jobseeker’s allowance list. 

The Chair:  I inform Mr Hanson, before he resumes his speech, which is an interesting canter through the various constituencies represented in Committee that, although he is not out of order, he is in danger of repeating the same point, albeit about different constituencies, over and over again. I ask him to bear that in mind as he proceeds. 

Mr Hanson:  Of course I will, Mr Howarth, but I am indicating to hon. Members, before they vote on the clause stand part—[ Interruption. ] The Minister just said that it is a waste of time—is that what he said? 

Mr Hoban:  I said that the right hon. Gentleman is wasting time. 

Mr Hanson:  That is interesting—I am wasting time. 

The Chair:  Order. I shall be the judge of who is and who is not wasting time. 

Mr Hanson:  This is important. The reason I went to the Library in the hour between 7 o’clock and 8 o’clock to get the figures is only that I want to show hon. Members in all parts of the Committee the impact of this particular vote in their constituency—just for jobseeker’s allowance, which is one part of the saving gateway. It might be a waste of time, because the Minister might well instruct his hon. Friends to vote against the amendment and to support the clause, but I do not think that it is a waste of time for the people who we represent and who would have benefited from the scheme had it gone ahead. It is incumbent on the Committee members to know exactly what the impact is before they vote for the clause and against the amendment. 

Alison McGovern:  Is my right hon. Friend aware that, alongside many economic variables, low savings rates cluster around localities. His pointing out the different impacts of the removal of the saving gateway and the possibilities of a review under his amendment seem to me to be relevant. 

Mr Hanson:  I am grateful to my hon. Friend. To be particularly relevant, let us look for example at the constituency of my hon. Friend the Member for Bristol East, just referred to, which has 2,185 people on jobseeker’s allowance at this moment in time. The hon. Member for Congleton, who I come to next on my alphabetical list, has 1,237 people on jobseeker’s allowance in her constituency. So, the proportional impact, which we shall come on to in a moment in terms of the equality assessment, is greater in the constituency of my hon. Friend the Member for Bristol East than in the constituency of the hon. Member for Congleton, in terms of jobseeker’s allowance. 

Fiona Bruce:  The right hon. Gentleman claims that those numbers would have benefited from the scheme, but the figures are not absolute, are they? The individuals would only have benefited had they chosen to take advantage of the scheme. There is a big difference. 

Column number: 255 

Mr Hanson:  There is indeed a big difference. It is very hard to participate in a scheme that does not exist. 

The scheme was supported by the hon. Lady’s party and the Liberal Democrats in opposition, as well as by the then Government. The scheme would have been operational from July. Of the 1,237 people in Congleton constituency, let us say that just 237 of them decided to save. That would have been 237 people who could have saved in her constituency and had match-funding from the Government, as part of the £115 million—yet now they cannot. 

My amendment asks the Minister to reflect on that concern in Congleton and to say whether he wishes to deny those people the opportunity to save—remember, they are unemployed, low income, jobseeker’s allowance individuals, who are not in any of the other categories. So, only 1,237 in Congleton on JSA, but I am sure there would have been more people in due course on all the other things. They are being denied this benefit, disproportionately more even than those in the constituency of my hon. Friend the Member for Bristol East. 

In passing, let me refer to my own constituency of Delyn. I have 1,380 people in my constituency on jobseeker’s allowance, which is pretty much on a par with the hon. Member for Congleton, except that my constituency is smaller than hers and I have a large number of people unemployed. They would have benefited. In my own patch, the Flintshire credit union would have been happy to help develop the scheme. Still in my constituency, there are some 15 or 16 post offices that would have been happy to participate in the scheme. I know that many of my wards, including the Flint Castle ward in the town I live in, are among the most deprived wards in Wales. They would have benefited—poorer people in my constituency, who are unemployed and need the support of the state, would have been able to access the scheme and to put money aside for the problems that they face. 

Claire Perry:  I believe that the number in my constituency is something like 923, but I might be out of date. If the right hon. Gentleman really believes that having access to a saving gateway for people on JSA is the best way to promote a savings habit and financial inclusion, rather than for example getting those people into work through the extensive Work programme that we will be implementing, then I imagine that he might have something to justify to his own unemployed constituents. I think that simply justifying that these people should be left on unemployment benefit and given various rather meaningless pieces of money such as this rather than getting them into sustainable work is the sort of new Labour gimmickry that my unemployed constituents were very keen to vote away in the last election. 

Mr Hanson:  I do not wish to see anybody stay on jobseeker’s allowance and if the hon. Lady asserts that I do she is completely wrong, because we want to try to secure full employment. I am simply saying to her that, as of today, the 957 people—she was almost right—in her constituency who were on jobseeker’s allowance in September would have qualified for this scheme and would now be able to put money aside. Moreover, if they came off JSA and they went into a low-paid job, paying less than £16,000 a year, as they may do initially, they could still continue that saving gateway. 

Column number: 256 

The saving gateway was a way in which we could help people to save even when they were on incapacity benefit, on JSA, on income support, on disability allowance and indeed if they were going to work at lower levels of pay. It particularly applied to part-time women workers who might take a job and come off jobseeker’s allowance, but they would have been able to maintain that savings culture accordingly. 

Claire Perry:  That is a fascinating point and I am grateful to the right hon. Gentleman for actually keeping us awake in this extended sitting. However, the point that I am trying to make—perhaps I am not making it very well—is that we have heard a lot of evidence that low income and unemployment is associated with poor savings habits, and I think that all of us have grave concerns about that. Therefore, if we are suggesting the opposite, which is that earning more is a way to stimulate saving, surely the best way to help people to save is to get them into better-paid, sustainable work, as our Government are proposing to do and as the last Government failed so dismally to do. 

Mr Hanson:  I pay tribute to the hon. Lady for wanting to create employment opportunities and I will support her in those efforts. However, the fact of the matter is that at the moment there are 957 people in her own constituency on JSA and they could have qualified, however temporarily, for the saving gateway scheme that would have operated from July and people on JSA could have qualified in the future for the same scheme. If they had come off JSA and gone into low-paid employment, they could still have qualified for that scheme. It is important to keep that savings culture going. 

I mentioned Devizes, but equally I could go on—as I will do—to my hon. Friend the Member for Edinburgh East, who is next in the alphabet. In her constituency, there are 2,375 people on JSA. As a relatively small constituency, it has a much higher proportion of people on JSA than is the case in the constituencies of the hon. Members for Congleton and for Devizes. 

Again, I hope that we will be able to develop further employment opportunities in Edinburgh, but at the same time that we are doing that this saving gateway scheme would have been available and the Minister has an opportunity during the next three years to keep it available. 

Let me look at Fareham—how could I possibly avoid Fareham in this round-robin review of the Committee? In Fareham, there are currently 978 people on JSA. That number has fallen during the last year. In every other constituency that I have talked about to date, the number of people on JSA has risen, but in the last year in Fareham the number of people on JSA has gone from 1,291 to 978. So it is no wonder that the Minister is not too worried about what happens to people on JSA and the savings culture, because the number of people on JSA in his constituency is falling. I accept that there are still 978 people in his constituency on JSA, but there has been a fall over the past 12 months and the Minister is now denying those 978 people the opportunity to be considered for that particular scheme. 

Let me look next at Makerfield. Currently, there are 2,182 people in Makerfield on JSA. There is a pattern here, Mr Howarth, and the pattern is that those areas that have greater deprivation have a higher level of JSA

Column number: 257 
and therefore this measure is disproportionately hitting those constituencies, such as those of my hon. Friends the Member for Makerfield, for Edinburgh East and for Bristol East. 

The Chair:  Order. Before the right hon. Gentleman gives way, I will help him to reflect on the fact that, if he thinks that he has established a pattern, perhaps he is stretching his argument a little too far. 

Mr Hanson:  It is important, Mr Howarth, that we reflect upon the impact of this measure on individual constituencies. I was simply trying to say that before Members vote on these matters, they need to consider that. 

I have received some news from my hon. Friend the Member for West Ham, which will relate to the comments that I am able to make in the Committee and the new strictures, Mr Howarth, may indeed be of help in coming to a conclusion on this matter very shortly. For the sake of accuracy and so we do not think they have missed out on these matters, I will just say that the hon. Member for Reading West has 2,323 people on jobseeker’s allowance; in the constituency of the hon. Member for Scarborough and Whitby, the Government Whip, that number is currently 2,188; and in the constituency of my hon. Friend the Member for South Down a very disturbing level of 3,655 people are on jobseeker’s allowance. Again, that backs up the points I have made today. 

I say to the hon. Member for Truro and Falmouth that one of the benefits of being a ‘T’ is that it takes a while to get around to her constituency. I did not want to miss her out; it is just that she is quite low down in the alphabet—although not as low as Wirral West and West Ham. In Truro and Falmouth, she has 1,208 people on jobseeker’s allowance. 

Kate Green:  In the alphabetic run on which my right hon. Friend is taking us, I am eager to hear where Stretford and Urmston is. 

8.45 pm 

Mr Hanson:  I shot past Stretford and Urmston— I am sorry. My hon. Friend will have to excuse me, but I put this together in haste during the half hour between half-past 7 and 8 o’clock. I have been rushing through it. Stretford and Urmston has 2,625 people on jobseeker’s allowance. On the last three—I do not wish to test your patience any further, Mr Howarth—I say to my hon. Friend that West Ham has 5,931 people on jobseeker’s allowance. Again, the pattern is that hon. Members who represent Labour seats, where there is a higher level of people claiming jobseeker’s allowance, will be disproportionately hit by the measure. In Wirral South the number of people claiming jobseeker’s allowance is 1,188 and in West Worcestershire the figure is 1,235. I am grateful to you, Mr Howarth, for your patience in allowing me to run through those figures. The point I am trying to make is that there are some key issues here. 

In conclusion, I understand that progress is being made on the matter, so I ask the Financial Secretary to reflect on what has been said here today. He should consider the issues surrounding the impact of the measure on constituents and the fact that the saving gateway was

Column number: 258 
a successful scheme that generated savings. Its maintenance or non-abolition will not cost the Minister or the state any resource over the next three years. I have moved a long way in giving up the £115 million next year, the year after and the year after. I hope that the Minister will accept the amendment and will revise and listen to the representations made in evidence sessions by my hon. Friends. In due course, I hope that he will also reflect on the scheme as a whole in clause 2. 

Question put, That the amendment be made. 

The Committee divided: Ayes 8, Noes 10. 

Division No. 11 ]  


Brown, Lyn   

Fovargue, Yvonne   

Gilmore, Sheila   

Green, Kate   

Hanson, rh Mr David   

McCarthy, Kerry   

McGovern, Alison   

Ritchie, Ms Margaret   


Baldwin, Harriett   

Bruce, Fiona   

Goodwill, Mr Robert   

Hemming, John   

Hoban, Mr Mark   

Maynard, Paul   

Newton, Sarah   

Perry, Claire   

Sharma, Alok   

Williams, Stephen   

Question accordingly negatived.  

Kerry McCarthy:  I beg to move amendment 37, in clause 2, page 2, line 21, at end add— 

‘(6) The provisions of this section shall not come into effect until an equality impact assessment has been completed by the Treasury.’.

The amendment is similar to amendment 36 to clause 1 in that it calls for an equality impact assessment to be carried out before steps are taken not to proceed with the saving gateway scheme pilots—I would not use the word “axe.” 

My right hon. Friend the Member for Delyn has, of course, already described what the purpose of the saving gateway scheme was and mentioned that it promoted saving among working age people on lower incomes. In discussing the amendment, I want to tease out how many people who qualified for that scheme could fall into minority categories not just because they are from particularly low incomes, but because they may well fall into other groups. We know, for example, that women are far more likely to be on low incomes, and, as the Budget has shown, they are being hit particularly hard by some of the financial measures introduced by the Government. 

On nurturing and fostering a saving habit among women on low incomes, I think that it is particularly important to note that, generally, women are in charge of household finances, and they live in areas where they are perhaps more vulnerable to pressure from loan sharks, doorstep lenders, and all of the other issues that my right hon. Friend raised when he talked about the importance of the saving gateway scheme. Endless research by child poverty groups—I am sure that my hon. Friend the Member for Stretford and Urmston could back me up on this—shows that having some money set aside, a little lump sum in reserve, for difficult times is incredibly important and incredibly useful for those struggling to get by and struggling to make ends meet on a low income. Usually people in such situations, who are used

Column number: 259 
to coping on a very low income, are very careful and know exactly how much they have to get by on and have to eke out. They know when they are getting towards the end, before the next money comes in, and there are often examples of women going without food so that they can feed their children. 

When something goes wrong, it really hits hard: if, for example, they have just about managed to get the money together for a car, and then suddenly the car breaks down and needs major repair—without that car they cannot get the kids to school and they cannot go to their part-time job—or if the fridge stops working; or if the heating breaks down and the boiler needs repairing. Those are the things that knock people completely off course. Although that is not specific to women on low incomes, it tends to be women—90% of lone parents, for example, are women—who are much more likely to find themselves in such a vulnerable position. As I said, they are also far more vulnerable to people who prey on them and force them down other routes, such as the loan sharks, the doorstep lenders or the people who charge absolutely phenomenal interest rates. They are also far more likely to be in sporadic employment, partly because of having to take maternity leave and so on, but also because women tend to be in part-time jobs that do not have the same job security. 

The purpose of the saving gateway is to promote a saving habit among people on lower incomes, and, because of that, the Bill is very disappointing. We have already debated whether equality impact assessments were carried out prior to previous legislation, but in some ways that is not relevant to what we are talking about today. Moving forward, now that we have the Equality Act 2010 legislation and the framework for carrying out equality impact assessments, we should be looking at the specific impact of these measures on people from excluded communities. 

We took evidence from the Association of British Credit Unions Limited during the evidence session, and my right hon. Friend the Member for Delyn has talked in some detail about the credit union movement. I know that there is cross-party support for the credit union movement, because I set up the all-party group on credit unions. My successor as chair of the group when I was appointed to the Whips Office was Ian McCartney, who was the previous Member for the constituency of my hon. Friend the Member for Makerfield. The current chair of the group is a Conservative Member, and I certainly know that when I was drumming up support it was one of the best subscribed all-party groups. 

There are people who really appreciate the role of the credit unions, and we have already heard that the credit union movement is very disappointed that the saving gateway is not going to be rolled out. The reason I refer again to the credit union movement, as my right hon. Friend the Member for Delyn has done, is because I asked ABCUL for statistics on who its client base would be, assuming that the saving gateway would be rolled out in part through the credit union movement. ABCUL has said that women make up more than two thirds of its membership. So 67% of credit union customers are women, and 19% of its customers—that is nearly one in five—are from BME backgrounds. Considering that many credit unions are located in rural areas, there is quite a substantial take up from the BME community in those areas that have a high BME population. 

Column number: 260 

On figures for the number of people in social housing, who do not own their own homes, who are in part-time employment or who are unemployed, the Bristol credit union found that—based on the people who gave them statistics about their background—25% are from the BME community and 52% live in social housing. It is clear that the demographics of some of those affected by the Bill are disproportionately likely to be women and from BME groups, because the credit union will not be able to roll out the saving gateway or to encourage a savings habit among them. 

We have been told that the credit union movement will be reluctant to venture into new financial products in future, so there will be other knock-on effects. We have also heard powerful evidence from Marc Bush of Scope about the importance of the saving gateway for people with disabilities. Members are probably anxious to get home or to attend the end of the debate in the Chamber, so I will not quote him at length, but he said that the saving gateway pilots 

“were a good thing in that they gave people an opportunity to save without penalty at a reasonable rate of return, which is really important, because those products just do not exist for disabled adults. The national roll-out would have pushed that forward to a whole group of disabled people who are financially excluded from the products that are on the market at the moment.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 69, Q187.] 

Mr Hoban:  Will the hon. Lady explain to the Committee what would have happened in areas where there was no coverage of credit unions and the only suppliers were Lloyds and RBS? 

Kerry McCarthy:  The Government were looking at the idea of using the post office network, with the credit unions working in partnership with it. From today’s news about the Post Office bank having its plug pulled, that looks less likely to happen. I do not think that just because the service would not be available to everybody across the board—credit unions are actually well established in some of the most deprived areas—that one should say it is not a good thing. The way forward should be to aim to have more credit unions or similar facilities in the areas that are not currently served. 

Mr Hoban:  Does the hon. Lady recognise that she would create geographical inequality in areas without credit unions and that there would be people who wanted to take part in this project but who could not do so, because there was no outlet or distribution channel? One of her hon. Friends made the point earlier that closeness to an access point is important for encouraging savings. 

Kerry McCarthy:  That is a negative way of looking at the issue. It works well if people, who would otherwise be financially excluded, are able to access financial services because there is a good credit union in their neighbourhood. We have such a credit union in Bristol with Money Go Round, which is five credit unions merged into one and which reaches out to communities. As I have said, 25% of its clients are from a BME background and 52% are in social housing. It reaches out to people who were not previously served by financial services. 

Column number: 261 

When the Treasury Committee had an inquiry into financial inclusion, we looked at basic bank accounts and the reluctance of high street lenders to offer them to people from poorer backgrounds, partly on the basis of postcodes and partly because they were not seen as good customers from a commercial point of view. If one says that the system works well, but because some people cannot benefit from it at the moment, we should scrap it, that is showing a very defeatist attitude. I would also say that communities without credit unions are often those that do not need them, because they are better served by mainstream banking services. The focus should be on those who are financially excluded, who tend to be in urban areas, many of which are well served by the credit union movement. As I have said, I have had long conversations with ABCUL, so I am well versed in that movement. I appreciate that there are plenty of parts of the country that would benefit from having a credit union. 

One cannot say that there is a geographical disadvantage, without looking at the problem in relation to income levels and whether people belong to an excluded group, have disabilities or are from the BME background. That helps to make our point that unless there is an equality impact assessment, how does one know which people will be affected by the proposed changes—that is the whole nub of it. A comprehensive equality impact assessment would show whether the geographical variances had an impact on minority groups or those who are financially excluded, or whether that was less of a problem. 

Alison McGovern:  I am interested in my hon. Friend’s argument. Is she saying that the equality impact assessment and other amendments tabled for discussion tonight would give clarity, research and more background for the purposes of the Bill, which seems rushed overall? 

9 pm 

Kerry McCarthy:  I think that that is true of the Bill generally. We are rushing into axing child trust funds and the health in pregnancy grant, and not proceeding with the saving gateway, when all those schemes are in their early stages. As my right hon. Friend the Member for Delyn said when debating his amendments, we are not necessarily saying that money must be pumped into the schemes now; we are only saying, “Let’s look into the impact that axing them would have and whether it’s possible to keep them going.” Perhaps as far as the child trust funds are concerned, we could keep the framework. Then, when the economy recovers, we might be able to put some money into the scheme, rather than throwing the baby out with the bathwater and axing everything completely. 

To return to the evidence, Mr Bush from Scope identified three aggravating features that affect disabled people’s access to mainstream financial services: inadequate financial capability and skills, lack of financial information and advice and the absence of appropriate financial products. He said that because people with disabilities often live on a mixture of benefits and income, mainstream financial services do not cope well with trying to analyse

Column number: 262 
their household income. Sometimes they do not take the benefits into account, will not accept gaps in employment and so on. 

Mr Bush thought that the saving gateway, tied as it is to advice on financial capability issues, offered people with disabilities an opportunity. As he pointed out, through the personalisation programme, which I know the Government are keen on, disabled people are now being given significant lump sums of money of their own—up to £50,000—to manage and to buy in services. That is quite a step for someone who has relied on fairly small amounts of weekly income. He thought that it was important that people should be given financial advice and support to manage that income. He also highlighted the fact that people with disabilities are vulnerable to less reputable lenders and loan sharks. 

To conclude on the general issue of the equality impact assessment, we know that although no equality impact assessment was done on the Budget, a fairly half-hearted impact assessment was carried out on the comprehensive spending review. 

Claire Perry:  The hon. Lady and I often share a media platform. She talks a great deal of sense, particularly about credit unions. I commend her for that; it is a huge all-party parliamentary initiative. However, she has strayed into the sticky territory of equality impact assessments. She sat on the Government Benches during the last Government. If she felt so strongly about equality impact assessments, why did she not ask for them to be carried out on some fairly significant measures, such as the abolition of the 10p tax rate, which arguably had a far greater impact on more people in this country than the proposed measures? 

Kerry McCarthy:  The Equalities Act is a fairly new initiative. It came into force in— 

Lyn Brown:  In 2010. 

Kerry McCarthy:  So some of the mechanisms and processes available are new initiatives. Perhaps the reason why we are so exercised comes down to the fact that as a Labour party in Government, we trusted ourselves rather more to bear the impact in mind whenever we introduced policy—[ Laughter. ] Let me finish my point. I compare what this Government have done with the analysis that had to be done, because the Government were not doing it, by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) when she was shadow Secretary of State for Work and Pensions. She said that of the £16 billion in cuts proposed by the Government, £11 billion would come from women. 

Claire Perry:  The hon. Lady is gracious in giving way. We could perhaps do a bit better than to say that the last Labour Government trusted themselves to do the right thing by disadvantaged people. If the former Government believed so strongly in the importance of equality impact assessments—they put them into legislation, as the hon. Member for West Ham pointed out, in 2010—surely she, as a member of the Government, should have been arguing those very points. Will she assure me that she at least made those points robustly to

Column number: 263 
the Treasury? Would she trust me if I said I believed that our Government had plans to lift millions of people out of poverty? 

Kerry McCarthy:  I think that one has to judge the parties by their respective records. The Chair is being very patient with us straying off the topic, but when it comes to equalities—whether in terms of gender, disability, sexual orientation or anything else one can imagine—the previous Government made huge strides over their 13 years. It was something that was neglected during the 18 years before that. I am not prepared to take any lectures on that. 

The Chair:  Order. The hon. Lady kindly said that I have been very patient, and indeed I have. This is not a debate about the respective merits of the previous Government and the current Government. This is a debate about a particular amendment to a particular clause of the Bill. The hon. Lady, and those who are considering intervening on her, might want to bear that in mind for the rest of the debate. 

Kerry McCarthy:  Thank you for that guidance, Mr Howarth. Regardless of the history relating to whether there should have been more equality impact assessments, I would argue that the initial impact assessment was half-hearted. A long time ago, I was about to quote the chief executive of the Fawcett Society. She said that the assessment that was carried out was 

“only partial and almost flippant in its lack of detail. The Treasury has explicitly chosen not to undertake any detailed consideration of the impact of benefit cuts, job losses or the slashed local authority budget – the three areas the Fawcett Society identified as particularly harmful to women's future economic independence and financial security.” 

When the Minister for Women and Equalities was pressed on whether she planned to publish equality impact assessments as part of the CSR, a vague, fudged answer was given. At one point, she said that she had no plans to commission separate work on how the provisions in the Budget would affect women. During an Adjournment debate on the impact of the Budget on women, the issue was again fudged, despite my hon. Friend the Member for Slough (Fiona Mactaggart) trying to get an answer. Given that the saving gateway project is targeted at particular groups, the removal of that scheme will have, at least potentially, a disproportionate impact on people from black and minority ethnic backgrounds and on people with disabilities in particular. I think that we would all agree that Marc Bush from Scope gave particularly powerful evidence highlighting the problems that people with disabilities have in accessing any financial services, but particularly in trying to get on to the savings ladder and in trying to access financial advice. 

Finally, on the impact that the measures would have on women, it is absolutely crucial that before the Government go ahead with axing the scheme—as my right hon. Friend the Member for Delyn has said, there is no need to rush into this; they could postpone the end date—a detailed equality impact assessment is carried out. We could then see whether some of those harder-to-reach groups and groups that are more disadvantaged could be helped, perhaps through other measures, or perhaps through the continuation of the scheme. I urge the Minister to think again and consider supporting the amendment. 

Column number: 264 

Mr Hoban:  I will not repeat the extensive arguments that I made on amendment 36 about why we went down this route and why we went for an initial assessment rather than the full equality impact assessment; I do not want to test the patience of the Committee. In the initial assessment, we went through the impact on various groups, and we acknowledged that our decision not to launch the saving gateway could have a greater impact on people with disabilities. They are disproportionally affected, in the sense that two of the passported benefits relate to disability and incapacity benefit. The measures will affect people in particular age groups, which we bear in mind. However, the impact on women is not significant, as they only made up slightly more than half of the eligible population. 

The hon. Member for Bristol East referred to the points raised by Scope and mentioned access to financial information. She makes an important point. Access to such information is an important way of encouraging people to save, enabling them to manage their money; that way, they can try to avoid the clutches of loan sharks and try to understand some of the issues about pay-day loans. That is why, to tackle some of the issues, we support the roll-out of a national financial advice service and the provision of an annual financial health check, available to all families for free; that will be funded by industry but organised by the Consumer Financial Education Body. It will ensure that some of the difficult-to-reach groups have access to information. That goes alongside the national roll-out of pilot projects that were started last year, with face-to-face advice for difficult-to-reach groups. 

While we may not be pursuing the saving gateway, our commitment to the national roll-out of the financial advice service and the annual financial health check will help to tackle some of the issues that hon. Members have raised. 

Alison McGovern:  Will the Minister be so good as to put on record his commitment to try to tackle some of the issues that were raised with us by the representative from Scope in his evidence? I was particularly concerned about the attitude of some financial services providers towards those with severe physical disabilities. If he would be so good as to put on record his and the Government’s commitment to tackling those issues, I would be very grateful. 

Mr Hoban:  I am happy to put on record my commitment to that. I do not believe that anyone should be discriminated against when it comes to the provision of financial services. We must ensure that proper steps are taken, so that there is widespread availability of financial services products. One of the downfalls, unfortunately, of the saving gateway scheme is that there would not have been such availability, and there would not have been enough outlets to enable us to spread the scheme across the whole country. Some groups would have been excluded, on a geographical basis, from experiencing the advantages of the scheme. There is more work to be done in this area, and I do not believe that the saving gateway product would have delivered the benefits that we would have liked, which is why we have decided to scrap it. However, I think we have tried to identify some of the issues relating to the equalities impact, and tried to look at how we could mitigate some of those effects. 

Column number: 265 

I would like the hon. Member for Bristol East to withdraw her amendment. I think we have made progress. She acknowledges that we have done so, compared with the previous Government, in tabling the reports, and I think she should welcome that. 

Kerry McCarthy:  I am not sure that I concur with the Minister’s summary when it comes to my approval, or non-approval, of what the Government have done so far with regard to equality impact assessments. I think I have made it quite clear that I feel that a lot of what the Government have done since they were elected in May, particularly in economic terms—in the Budget and the spending review—has completely disregarded any concerns for the disproportionate impact on certain groups, particularly women and people from poorer backgrounds. 

If one looks at what the Government have done in their initial assessment, one has to conclude that the summaries that they have come up with are so vague as to be virtually worthless. The assessment of the impact of the saving gateway on different racial groups says that 

“no detailed breakdown of eligibility for the SG by different racial groups was possible.” 

Earlier, I tried to point out that in my own city, if there was involvement of 25% of the clients of a credit union, which would offer the saving gateway if it was allowed to, one could argue that the number of people eligible for the saving gateway project would be high among particular ethnic groups. 

Mr Hoban:  The hon. Lady must recognise that arguing from the customer base of one credit union in Bristol does not provide the qualitative analysis that is needed for a report of the kind that we are discussing. 

Kerry McCarthy:  That is exactly why I am arguing for a detailed equality impact assessment. I was at a meeting in south London the other day, and I know that there is a good credit union there. It has a big customer base that again includes a large number of people from black and ethnic minority backgrounds. That is obviously not the case across the country, but that is why the issue is important. At the moment, all the Government know is that there is no detailed breakdown of eligibility for the saving gateway by different racial groups. 

Mr Hoban:  Part of the problem, as I am sure the hon. Lady recognises, is of course that we do not collect data on benefits by racial group. 

9.15 pm 

Kerry McCarthy:  I appreciate that, but the whole concept of an equality impact assessment is to try to dig as deep as we can. The information available is obviously not 100% accurate, and it would be going too far to put in place the bureaucracy and expense necessary to collect all that information. However, it seems that the Government have so far done very little that would allow even the most rudimentary research on which racial groups would be affected and whether it would have a disproportionate impact on people from BME backgrounds. 

I move on to what the Government say about people with disabilities. With regard to the saving gateway, the impact assessment again states:

Column number: 266 

“Information is not available on the proportion of the eligible population that would have been disabled, as this data is not collected for all of the ‘passporting’ benefits. However, as incapacity benefit and severe disablement allowance would have been passporting benefits, the eligible population was expected to include a higher proportion of people with a disability than the general population.” 

Therefore, it is accepted that more people with disabilities might be affected by the measure being introduced than people from the general population. For mitigating action, however, it states, “No specific mitigation appropriate”. The Government seem to be flagging up the fact that people with disabilities will be disproportionately affected, but they do not seem to think that that is a problem worth doing something about. 

Finally, on different gender groups, the impact assessment states that women would have made up about 55% of the eligible population. I would argue that one cannot look at it strictly in numerical terms and conclude that 55% of the people who would qualify for it are women; one has to look at the circumstances of women’s lives. In particular, they are more likely to go in and out of employment, to be trying to juggle many different things, such as part-time work and child care, and to be moving from being totally reliant on wages to being totally reliant on benefits, and sometimes a mixture in between. 

I think that there would have been a higher take-up by women of the service that the saving gateway product would have offered, but I am again speculating because the Government have not done the work in determining whether that would be the case. That is a real opportunity missed, because even if the Bill is passed and we end up without a saving gateway scheme, I hope that the Government will take financial inclusion and the idea of promoting a savings culture seriously enough to look at putting something else in its place. We could have used that opportunity to do a worthwhile assessment, so that we knew what should be brought in to replace it. 

Question put, That the amendment be made. 

The Committee divided: Ayes 8, Noes 9. 

Division No. 12 ]  


Brown, Lyn   

Fovargue, Yvonne   

Gilmore, Sheila   

Green, Kate   

Hanson, rh Mr David   

McCarthy, Kerry   

McGovern, Alison   

Ritchie, Ms Margaret   


Baldwin, Harriett   

Bruce, Fiona   

Goodwill, Mr Robert   

Hoban, Mr Mark   

Maynard, Paul   

Newton, Sarah   

Perry, Claire   

Sharma, Alok   

Williams, Stephen   

Question accordingly negatived.  

Question put, that the clause stand part of the Bill. 

The Committee divided: Ayes 9, Noes 8. 

Division No. 13 ]  


Baldwin, Harriett   

Bruce, Fiona   

Goodwill, Mr Robert   

Hoban, Mr Mark   

Maynard, Paul   

Newton, Sarah   

Perry, Claire   

Sharma, Alok   

Williams, Stephen   

Column number: 267 

Brown, Lyn   

Fovargue, Yvonne   

Gilmore, Sheila   

Green, Kate   

Hanson, rh Mr David   

McCarthy, Kerry   

McGovern, Alison   

Ritchie, Ms Margaret   

Question accordingly agreed to.

Column number: 268 

Clause 2 ordered to stand part of the Bill. 

Ordered, That further consideration be now adjourned. —(Mr Goodwill.)  

9.21 pm 

Adjourned till Thursday 11 November at Nine o’clock.