Clause 12 - Subscription limits
Child Trust Funds Bill
10:45 am
Mr David Laws (Yeovil, Liberal Democrat)
The hon. Gentleman is entirely right. The issue is linked, particularly in the minds of providers, with the returns that they will receive from the
accounts and the charges that they will apply. Presumably, they feel that the administrative costs of dealing with small amounts will be high, and that if the charge is set low it will not cover those costs.
As I said when we touched on charges, the Financial Secretary should approach with caution the representations that have been made. If I were a provider, I would be saying the same things that providers said in their evidence to the Select Committee, and I would be looking to increase as far as possible the terms on the accounts.
When the Minister introduces the regulations, we will find out whether it is necessary for the Government to make the suggested trade-offs over charges. There would be concern if she were to allow the charge cap to rise significantly because that would potentially eat into the value of the accounts for people on low incomes. There is concern from both perspectives.
In tabling the amendment, we were concerned that the Government might be moving away from the low minimum contribution level. The Minister's latest comments seem to suggest a watering down of the Government's intention to have a £5 subscription limit. When she spoke on Second Reading on 15 December 2003, she cited the example of how much somebody on a low income might save, but the amount had increased from the £5 level that was included in the document and mentioned to the Select Committee, to £10—an amount that would accrue £4,500.
You may remember, Mr. Benton, as I think you were in the Chair at the time, that when we discussed charges I pressed the Minister on the £5 minimum contribution. By then, even the £10 amount had disappeared and she was able to say only:
''I am certainly aware of the impact of minimum contribution levels for people in the lower socio-economic groups, and want to ensure that the child trust fund is available to them as a savings vehicle. That is one of the matters that I will bear in mind. The minimum contribution level will be set out in the regulations, alongside the level of the charge cap.''—[Official Report, Standing Committee A, 6 January 2004; c. 55.]
Perhaps I have been reading too many of the Minister's contributions, and I certainly hope that I have been reading too much into them because there seems to have been some backsliding. She seems to be moving from her initial minimum contribution level of £5 towards the level suggested by the financial market providers of £20, £50 or £100.
We tend in this country to have a savings regime, and sometimes a public debate, that assumes that middle-income Britain is middle Press Gallery Britain and that incomes of £40,000 and £50,000 are typical of the average family. The Daily Mail commented on that the other day when referring to council tax issues. The debate is sometimes wholly detached from the reality of the vast majority of people, whose incomes are generally far too low to save and whose savings aspirations would involve much smaller amounts than the £50 or £100 a month discussed by the Norwich Union.
I recently became godfather to the child of a friend of mine and thought that I was being generous in setting up a pre-CTF account with a contribution
equivalent to less than £10 a month. [Hon. Members: ''Stingy.''] I thought that that amount, which is higher than the minimum contribution level that the Government have been talking about but lower than £7, was reasonably generous. I now discover that I may even fall foul of the minimum level that the Financial Secretary is setting for all my constituents, and my income is much higher than theirs. I may feel guilty and have to increase my contribution if the child's parents find out about that.
I want to be reassured that not only is my contribution set at a reasonable amount, but that people who may be not stingy but unable to save huge amounts each month are able to do so. I urge the Financial Secretary to take advantage of this opportunity to continue her constructive approach by telling me that I have been reading too much into her comments and that when the regulations emerge shortly they will reinstate the £5 minimum subscription limit, and not move to a higher and less achievable level.