Savings Accounts and Health in Pregnancy Grant Bill

My Lords, I thank the Minister for his clear introduction to this debate. I would have more sympathy with the noble Baroness, Lady Thornton, if the Labour Party had been able to explain how it was going to save so much as £1 of the £44 billion that it legally committed itself to cutting under the legislation to halve the budget deficit, which it passed in the previous Parliament. Every time a measure that involves a cut of any sort to public expenditure comes before your Lordships’ House, the Labour Party opposes it. Today has been no different. The noble Baroness accuses those of us on these Benches of many heinous crimes—of being heartless and uncaring. I reject those allegations, which are completely unfair on her part and simply untrue. As regards the child trust fund, the noble Baroness, Lady Thornton, accused the coalition Benches of broken promises. This is a Liberal Democrat promise that the coalition has kept. She says she has never heard any arguments in favour of that stance. She has been spared the many speeches that I have made on the subject in your Lordships’ House. We opposed the introduction of the child trust fund, we have opposed it consistently ever since and we do not now mourn its passing. There are several reasons for that; I will give just two. First, it is hopelessly untargeted. Only 73 per cent of parents take up the offer of doing something with the voucher that they get when they are allocated their child trust fund. Incidentally, this figure has remained absolutely static since the child trust fund was introduced in 2002. Around that figure, in the constituencies that are predominantly middle-class—Buckinghamshire, for example—the percentage goes up to 84 per cent. In the constituencies that are poor—Belfast West, for example —it goes down to 48 per cent. The people who take up their options under the child trust fund to insert additional savings for their children are predominantly those who need no extra incentive from the state to do so. That is our first major criticism of it. Secondly, one of the purposes of the child trust fund was to instil the saving habit in young people. The saving habit involves forgoing expenditure now to gain greater benefit later. That is what thrift is all about; that is what the saving habit is all about. This measure does nothing to encourage thrift among young people. It is simply a windfall gain at the age of 18. That is, again, an argument that I have made many times in your Lordships’ House. Looking to the future, for many parents, the ISA—particularly a child ISA—is a tax-efficient way of saving for their children. That is the way in which we should look for parents to gain a benefit in saving for their children. The noble Baroness, Lady Hollis, shakes her head but I believe it to be the truth, however hard she shakes it. Looked-after children are clearly in a different situation from everybody else because they do not have parents. Like the noble Baroness, I hope the Government can do something for them. However, doing something for looked-after children is very different from doing something for every child. Looked-after children are a very small proportion of the population. Doing something for them in a whole raft of ways is hugely important. We do quite a lot for looked-after children and no doubt much more can be done. It would be a very positive move if Mark Hoban and his colleague, the noble Lord, Lord Sassoon, could enable something to happen in this specific area for looked-after children. However, that is very different from saying that every child, however affluent, should benefit from this scheme. Therefore, I do not change my view that, on balance, abolishing this scheme is a more sensible way of saving public money. It was difficult to oppose the principle of the saving gateway and we did not. However, we had major questions about it. One was that unlike middle-class tax incentives for saving which apply, for example, to pensions all the way through, the saving gateway applied only to two years of savings. Thereby, the amount by which you could benefit was relatively small. The saving habit for people—having got them into it and having given them the incentive—was removed after two years. You could not get another one, whatever happened to you. So if the scheme would kick-start a saving habit within two years, great; but if not, I am afraid that it was unlikely to have been successful. The other question that I would very much have liked to have been answered was: what proportion of the potential beneficiaries of the saving gateway would actually have taken it up? One of the obvious problems about poor people is that they do not have a surplus. Therefore, while we would ideally wish them, like everyone else, to save, in reality that is crying for the moon for many of those individuals and families. They require every penny that they have to make ends meet. The Minister also mentioned that virtually no financial institution was prepared to touch the saving gateway because it was not worth their while. Not even the Post Office, which one would have hoped would administer this scheme, was prepared to do so because it could not make it pay. One wonders whether, in reality, once the measure had been introduced, RBS and Lloyds would have continued with it. As we have seen with basic bank accounts, it is very difficult to get the banks enthusiastically to support things that they do not make any money from. Given our approach to the largely nationalised banks, which unfortunately is almost totally hands-off, I would not put any faith in them implementing the saving gateway. It would be like being in favour of sin to say that the saving gateway was a terrible idea, but it was badly flawed and, frankly, if we are going to make any cuts, this seems to be a reasonably high-priority and low-cost—in social terms—way of doing it. The health in pregnancy grant is another untargeted grant. In times of stress and financial stringency one should look at targeting the public money we have available for this kind of thing, rather than making a blanket payment. I note that the grant was introduced in April 2009, and important though it may be, it was not exactly the top priority for a Labour Government, who at that point had been in office for 12 years. Again, in an ideal world, would it not be nice if we kept this grant? We are not in an ideal world. Under Labour, we were not going to be in an ideal world. The Labour Party was committed to making cuts worth tens of billions of pounds; it still has not identified where they should be made. If you have to make cuts, these are sensible. Reluctantly, on that basis, I support the Bill.