Clause 9 - Supplementary contribution by
Child Trust Funds Bill
4:15 pm
Mr George Osborne (Tatton, Conservative)
Yes. It could go the other way round and become universal progressivism. Whatever it means, it is contradictory and we have a means-tested welfare benefit.
The advantages of a means-tested supplementary contribution are obvious—no doubt the Minister will put those with greater force and passion than I. A strong argument could be made for directing a little bit extra into the child trust funds of the third of children from the poorer families who are receiving child tax credit. That sum is £250 at birth, and perhaps an extra £50 at seven years old. We debated that earlier. However, even on the Government's estimates, that supplement will not add up to a huge amount over the course of a child trust fund. It is clear, if one considers table 3.1 of the White Paper, that better-off children receiving a £250 initial contribution will have £456 at the end of their 18 years, whereas after the same period, with the £500 supplementary contribution, a child will have £911. There is a £455 difference. I am not saying that that is not a tidy sum of money, but it is likely to be completely swamped by the difference between accounts where parents and relatives have contributed to the funds and those where they have not.
Even if a relative or a family is putting £10 a month in a child trust fund, it will be worth £3,941, which is far more than the £456 or the £911. Indeed, if parents contribute the maximum amount, which many will, the child will have £35,000 when they are 18. The supplementary contribution will not make a huge difference or level the playing field. As I argued on Second Reading, that is likely to mean that this measure will increase wealth inequality in our society. Although I do not have a philosophical objection to that, perhaps many Labour MPs do. They should be under no illusion: as a result of this policy, children from better-off families will have much larger sums at 18 than those from less well-off families. The means-tested supplementary contribution would have to be much greater than £250 to overcome that.