Clause 3 - Requirements to be satisfied
Child Trust Funds Bill
2:30 pm
Mr George Osborne (Tatton, Conservative)
I beg to move amendment No. 9, in
clause 3, page 2, line 31, at end insert—
'(1A) Regulations under subsection (1) may not impose a requirement that the charge levied by the account provider must be set at less than 1.5 per cent. of the total value of the relevant funds under management by the account provider, divided by the number of child trust funds held with the account provider.'.
I should like to welcome you to the Committee, Mr. Amess—[Interruption.]
Normally, hon. Members try to get out of Committees, not into them. The hon. Gentleman is a keen Treasury Minister who wants to check up on his colleague.
Amendment No. 9 is about the charge cap, which is one of the most important unresolved issues in the Bill. I propose that the regulations may not impose a requirement that the charge levied by the account provider must be set at less than 1.5 per cent., and later I shall say why I chose that figure. This element of the Bill is crucial. Many financial providers argue that the level of the charge cap will be fundamental to the success of child trust funds. Does the policy encourage lower-income families who do not currently save for their children to do so? That will be the test of whether child trust funds really work.
I know that the Minister has set out various objectives for this policy—we debated them on Second Reading—among which are encouraging savings, building assets, and helping people to understand the benefits of savings and make better financial choices. Those are laudable objectives, but I suggest that the last three are dependent on the first. If the proposal does not get people saving, they will not understand the benefits of it, they will not build a substantial asset, and they will not be able to make the better financial choices that we all want to see.
Regardless of how the Minister will judge whether the policy is successful, it is clear to members of the Committee and the wider world—or at least those who are remotely interested—that child trust funds will
succeed only if it is clear that lower-income families who do not currently save are using them as a vehicle for saving and building up assets of their own.