Mr David Amess (Southend West, Conservative)

I remind the Committee that with this we are discussing the following: Amendment No. 147, in

clause 27, page 15, line 17, at end add—

'(4) No order may be made under subsection (3) until the report specified in section [report on savings effect of child trust funds] has been laid before Parliament.'.

New clause 5—Report on savings effect of child trust funds—

'The Treasury shall lay before each House of Parliament a report setting out the Treasury's estimate of the net increase in saving which will result from the provisions of this Act.'.

New clause 13—Annual report on effect of child trust funds on wealth distribution—

'The Treasury shall lay before each House of Parliament every year a report setting out the Treasury's assessment of the effects of the provisions of this Act on wealth distribution in society.'.

Ms Ruth Kelly (Financial Secretary, HM Treasury; Bolton West, Labour)

We had a very constructive debate this morning. When we adjourned I had just reached the conclusion of my remarks and, in the light of that debate, I urge the hon. Member for Yeovil (Mr. Laws) to withdraw his amendment.

Mr David Laws (Yeovil, Liberal Democrat)

Thank you, Mr. Amess, and good afternoon to you on this final lap of proceedings in Committee. We had a very interesting debate on new clauses 5 and 13, and the hon. Member for Tatton (Mr. Osborne) explored in new clause 13 the extent to which the Bill would succeed in narrowing the wealth inequalities in society. I had hoped for a while, as the Minister had, that the thrust of his comments might mean that he was changing his mind on the Conservative party's support for this Bill. After all, the Conservative party has changed its line on tuition fees during the past couple of days, and I had hoped that what the hon. Gentleman said was a signal that he had been persuaded by some of the more sceptical members of his Treasury team that a more robust position on the Bill would be justified, but, alas, the hon. Gentleman pointed out that he does not have

a problem with widening inequalities in society, even though dealing with that may be one of the supposed underlying objectives of the Bill.

I shall not press new clause 5 to a Division. I think that we have succeeded in exposing the bankruptcy of the Government's thinking in this area, not least that the Bill is presented as one designed to improve and increase the amount of savings in society. It is supposed to be evidence of that policy, but there is no evidence that additional saving will be encouraged as a consequence of the establishment of the child trust funds, and we note that the initial moneys paid into the child trust funds account will have to be borrowed by the Chancellor from the international financial markets, which raises the question of whether it is in the long-term interests of the country. We have exposed those issues during the debate, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr David Laws (Yeovil, Liberal Democrat)

I beg to move amendment No. 160, in

clause 27, page 15, line 12, after 'section', insert

'section [proposals for conversion of child trust funds to tax-advantaged accounts for retirement saving],'.

Mr David Amess (Southend West, Conservative)

With this it will be convenient to discuss the following: Amendment No. 161, in

clause 27, page 15, line 17, at end add—

'(4) No order may be made under subsection (3) until the report specified in section [proposals for conversion of child trust funds to tax-advantaged accounts for retirement saving] has been laid before Parliament.'.

New clause 7—Proposals for conversion of child trust funds to tax-advantaged accounts for retirement saving—

'The Treasury shall lay before each House of Parliament a report setting out proposals for child trust fund accounts to become, on maturity, tax-advantaged accounts for retirement saving.'.

Mr David Laws (Yeovil, Liberal Democrat)

Again, we have a similar pattern of amendments and a new clause. Amendments Nos. 160 and 161 are enabling, tidying-up amendments that relate to new clause 7. New clause 7 deals with an issue that we touched on at the beginning of the proceedings of the Committee. It would require the Treasury to lay before each House a report setting out proposals for child trust fund accounts to become, on their maturity, tax-advantaged accounts for retirement saving.

The intention is to salvage something from the Bill, and invite the Government to consider what will happen to the child trust fund accounts on maturity. There is a serious problem involved in getting a large segment of the population to save for their retirement. No doubt a proportion of that problem is related to the low incomes that many people have that make it difficult to save for retirement.

Whether one likes or loathes the idea of the child trust fund, it seems to me that there is an opportunity to say to those young people who have had the child trust fund account since birth that they ought to think of it not as something that they raid at the age of 18 for business purposes or overseas travel, but as a savings account that they can use for the future, either to save for the everyday expenses and costs that arise early in

people's careers, or to save for retirement in an environment where there is an increasingly complex pensions system that I suspect few people in the country, let alone Parliament, understand. The Government ought to take the opportunity afforded by the existence of the accounts to consider whether those accounts could mature into pensions savings accounts that would be tax advantaged. They would persuade people to take the responsibility for saving for retirement rather than relying on the means-tested benefits that are being introduced by the Government, many of which are powerful disincentives and some of which will probably not be around in 30 or 40 years when people retire.

This is the second time of asking for the proposal, and I invite the Minister to consider whether it is something that the Government might take up themselves at some stage.

Mr Michael Jabez Foster (Hastings & Rye, Labour)

The proposal to convert the funds into retirement savings plans at the age of 18 is about as daft as anything that has been proposed. There is a practical reason why it is pointless. I suppose that it could be used by the Liberals to suggest that it is part of their pension planning, but it can have very little other value.

A pension retirement fund is, by its nature, blocked and incapable of use. Investments must stay in the fund, as with the child trust fund, and it cannot be drawn on. The idea of a fund—the very purpose of which is to enable students to have some cash at the age of 18—being locked again with the key thrown away until their retirement is difficult to understand.

The whole purpose of the fund is not necessarily to advantage the young person to go to university; it may be used at a later stage, such as after a gap year or the experience of employment. None the less, it is a fund that they can draw on even as a mature student to enjoy the benefits of higher education, or for a deposit on a house. The idea that it should be locked away forever, or at least until they reach retirement, would defeat its whole purpose, and I could not agree to it.

Ms Ruth Kelly (Financial Secretary, HM Treasury; Bolton West, Labour)

I welcome the comments made by my hon. Friend the Member for Hastings and Rye (Mr. Foster). He clearly understands the purpose behind the Bill rather better than the hon. Member for Yeovil. I have often made it clear that there are multiple objectives behind the child trust fund because it opens up opportunities for young people at the age of 18 that they might not otherwise have. Were they to feel that they already had sufficient opportunities open to them at 18, because of parental backing, for instance, they could choose to put the money into a pension. There is nothing stopping them from doing that, although one may argue over whether it is in their best interests to do so.

The legislation does not prevent young people from putting the money into a pension, so for the reason given by my hon. Friend and because freedom of choice is open to the individual, I suggest that the hon. Gentleman withdraw the amendment.

Mr David Laws (Yeovil, Liberal Democrat)

I am obviously disappointed at the reaction that my particularly modest new clause 7 has had. The hon. Member for Hastings and Rye and the Minister are right; it was nothing more than an act of charity held out towards the Minister in the hope that the Government might salvage something from their mess of a pensions policy and their ill-thought-out Child Trust Funds Bill. I can see that the Minister does not want to take up the olive branch. I therefore lay it down and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr George Osborne (Tatton, Conservative)

I beg to move amendment No. 190, in

clause 27, page 15, line 14, leave out subsection (2).

Mr David Amess (Southend West, Conservative)

With this it will be convenient to discuss the following: Amendment No. 191, in

clause 27, page 15, line 17, at end add—

'(4) No order may be made under subsection (3) before 1st September 2005.'.

New clause 11—Prohibition on advertising in pre-election period—

'(1) The Government shall not advertise the introduction of child trust funds during a pre-election period.

(2) In this section, a ''pre-election period'' means any period that—

(a) starts with—

(i) the calling of a General Election by the Prime Minister, or

(ii) the day that falls twenty-five days before any Parliament shall cease to have continuance in accordance with the provisions of the Septennial Act 1715 (1 Geo 1 Stat 2 c 38),

whichever is the earlier, and

(b) ends with the day of the ensuing General Election.'.

Mr George Osborne (Tatton, Conservative)

It is good to see you in the Chair, Mr. Amess. I am sure that you will be as disappointed as I am that, as this may be the last sitting, you may not be in the Chair all afternoon. It depends on later clauses, but I can see some Government Members who opted for this afternoon's sitting rather than this morning's looking absolutely appalled.

Amendments Nos. 190 and 191 deal with timing, as does the Liberal Democrat new clause 11, to which I am sure that the hon. Member for Yeovil will speak. For those in Committee who followed Second Reading, they will perhaps remember that I referred in my speech to the Australian shadow Foreign Secretary. I was not previously aware of his existence, but on reading the minutes of the Institute for Public Policy Research summit held at No. 10 Downing street—

Mr Andrew Love (Edmonton, Labour/Co-operative)

They should have invited you.

Mr George Osborne (Tatton, Conservative)

They certainly should. It was a grand occasion. It was opened by the Home Secretary—I am not sure why he opened the summit on child trust

funds—and the main presentation was given by the Australian shadow Foreign Secretary. It was a truly bizarre occasion. The only two people who spoke who had any direct dealings with the Bill were the Financial Secretary, and Mr. Gavin Kelly, but we will not return to that debate.

The Australian shadow Foreign Secretary—it is good to see how all these sister parties around the world are becoming shadow parties as the years go on—said that child trust funds were a perfect example of

''a third way within the third way.''

A huge wave of nostalgia came over me, because we just do not hear the phrase ''third way'' these days. I remarked as much to the right hon. Member for Hartlepool (Mr. Mandelson), with whom I happened to be at a conference on Friday, and he told me to stop being cheeky and shut up. However, we do not hear the phrase ''third way'' any more—certainly not from people who are in power—and so it was good to hear it.

The minutes state that the Australian shadow Foreign Secretary

''finished his presentation with a potential problem.''

He said:

''The long-term nature of the Child Trust Fund could mean that it does not fit well with the electoral cycle. It will need to be sold to the public as there are not necessarily any short-term gains to point to.''

As I said on Second Reading, we have to congratulate the Financial Secretary on trying to solve Kevin Rudd's problem for him, and trying to fit a long-term policy into the short-term electoral cycle. The Government launched the policy of what their briefings at the time called baby bonds before the 2001 general election. They started briefing in the autumn before 2001, and the policy was announced in the Chancellor's Budget just before the general election.

We have examined the Bill in great detail in Committee, and we have discovered that the whole thing will be launched in April 2005. I would have a pretty good bet that the general election will be in May, or possibly June, 2005. That means that 1.8 million parents will get nice, shiny child trust fund vouchers sent to them in the run-up to the general election. That is a strange coincidence. The hon. Member for Yeovil pointed out the Government have even timed the top-up payments, at the age of seven, to coincide with the election after next, but of course the Labour Government will not be in power to benefit from that.

Mr Hilton Dawson (Lancaster & Wyre, Labour)

I see where the hon. Gentleman's argument is taking us, but he spent some time late this morning explaining that there is a growing wealth divide in this country, and that well-off people are getting more well off. Given that well-off people who may have been misguided enough to vote Conservative in the past are doing much better under the enlightened policies of the Labour Government, why should the Labour Government need to bother adjusting child trust funds around the electoral cycle?

Mr David Amess (Southend West, Conservative)

Order. I hope that the hon. Member for Tatton will not be tempted to respond to the points that have been made.

Mr George Osborne (Tatton, Conservative)

I shall not respond. If the Government accept my amendment, they will prove the point made by the hon. Member for Lancaster and Wyre (Mr. Dawson), which was that they do not need to adjust the funds around the electoral cycle. Perhaps they will accept it.

On wealth inequality, I share my view with the Prime Minister. Before the 2001 general election, I distinctly remember him arguing at length with Jeremy Paxman about wealth inequality. The Financial Secretary said that

''there are signs that wealth inequality is increasing''

in our society.

However, I will return to the point. There is this strange coincidence that 1.8 million parents will get the vouchers just a month before the likely date of the next general election. My colleague, my hon. Friend the Member for Havant (Mr. Willetts), has written to the Electoral Commission to alert it to the fact that that is the case and to see whether it contravenes any electoral laws. We will wait to hear from the commission.

I know that the Financial Secretary is as committed as I am to taking cynicism out of politics and I also know, as she does, that the timetable is getting very tight for the launch of this policy in April. We have still not had any word about the charge cap, the sales regime and everything else that she promised at the beginning of this Committee would be published shortly. At the end of the Committee, we are still being told that.

The Government expect that by next January—that is when they plan to start sending out the vouchers to some of the backlog of parents whose children were born after 1 September 2002—the financial providers will have designed their products, marketing strategies and systems, double checked them and started selling them, all within the space of 11 months, assuming that they get going before the legislation has passed through Parliament. If the Government accepted amendment No. 190, which would at least delay the initial issuing of the vouchers beyond January, that might help them. Many providers are concerned that the timetable is very tight and the Inland Revenue has an enormous job to do to develop its systems and avoid another tax credit fiasco. The Financial Secretary told the Committee earlier that the Revenue has sacked its current IT provider, EDS, and that a new provider will take over the administration of child trust funds just a couple of months after the system is up and running.

There have been some welcome developments in the Committee. Given the number of Committees on which I have sat, this has been extraordinary in the sense that the Government have agreed to go away and think carefully about the proposals from my hon. Friend the Member for Witney (Mr. Cameron) for a scheme for disabled persons. The Minister agreed to try to achieve by regulations my point about extending eligibility of child trust funds to children born before 1

September 2002 and I have had a conversation with the chief executive of the Children's Mutual who said that the Treasury has already contacted his company, so that is happening. She also agreed to go away and think about the 16 and 17-year-olds in England, Wales and Northern Ireland. I also hope that she may be able to do something about children in care, although she was less forthcoming about that in public. Other matters have emerged during this Committee that she will want to build into the system.

We have a tight timetable because of the delay in the decision on the charge cap, which the Financial Secretary could not have envisaged because it is driven by the Financial Services Authority delaying a decision in the Sandler suite of products. The delay that she could not have foreseen has forced her to delay the issue of a charge cap. We know that there will be a tight timetable for the introduction of the scheme and we do not want an administrative fiasco when the scheme is launched. There would be nothing worse for those who want the scheme to work than an administrative fiasco that puts people off saving into child trust funds because they would become redundant almost from day one and would need a huge relaunch at some point in the future. The Inland Revenue will have a new IT provider in June or July next year. The Financial Secretary has undertaken to go away and think about some of the matters that we have raised in Committee and she wants to take cynicism out of politics. Given all that, why does she not delay the implementation and start of child trust funds until September 2005, which is what my amendment proposes? That would not have a massive effect on child trust funds in their entirety because they will not mature for 18 years, so it would not make a huge difference to the individuals concerned whether they receive the vouchers in April or September. There may be a small additional cost if the Government wanted to compensate people for the slightly later start date, but they will already pay a little extra for people whose children were born between 1 September 2002 and the beginning of the scheme.

My amendment would have a number of advantages. First, September coincides with the start of the school year, as does eligibility to the scheme. It was built around a start date in September, so it is not necessary to start in April, and there is no requirement to operate on a financial year basis. The Minister would work with a single IT provider, so would not have the problem of swapping providers soon after the scheme was established. There would be extra time for the financial providers and the Inland Revenue to get their systems right, and she would be able to deal with the nasty rumour that this is all being done to fit in with the Australian shadow Foreign Secretary's view that we must squeeze the whole thing into an electoral timetable. I cannot think of any good reasons at all why the Minister should not accept my amendments.

Mr David Laws (Yeovil, Liberal Democrat)

The hon. Member for Tatton has made a most powerful and persuasive case for delaying the introduction of the child trust fund until September

2005. Perhaps this is another Government policy that the Minister might reconsider. Obviously, the effect of new clause 11 would be slightly different from that of the hon. Gentleman's amendments, although it makes a similar criticism of the CTF proposals: specifically, that the timing appears to coincide with the anticipated date of a general election. It is, no doubt, pure coincidence that the additional payments also appear to coincide with future general elections.

It is certainly unlikely that any rational voter would allow their vote to be bought off by a Government proposal to borrow a large sum from the financial markets and pay it into accounts that cannot be touched for 18 years. Clearly, the borrowings that the Government take out on voters' behalf will neutralise the effect of the money that is paid into the CTF account.

I am sure that the Minister would not want it to appear that there is a connection between the election date and all the cheques for CTF accounts from 2002 to 2005 going out in one wodge. In any case, there is a serious danger that people will not take up the Chancellor's scheme. Many means-tested schemes are unsuccessful on take-up, and we would not want the launch of this new scheme to be affected by the restrictions on advertising during a general election period.

The Cabinet Office has released and regularly updates a paper entitled, ''Information Activities during a General Election''. It specifies the limitations that ought to apply in general election periods. It begins:

''The general principle governing information activities during a General Election is to do everything possible to avoid competition with Parliamentary candidates for the attention of the public.''

I am sure that hon. Members would agree that that is important. The paper continues:

''In addition, it has always been recognised that special care must be taken during the course of an Election since information material produced with complete impartiality which would be accepted as objective in ordinary times, may excite criticism during an Election period when feelings are running high.''

Clearly, that would be the case with the child trust fund payments, which may be made during an election period.

Hon. Members may also be aware of the further details that are given in the second part of the Cabinet Office note under the title ''Paid Media''. Section 10.g states:

''New advertising campaigns will in general be postponed and running campaigns closed. However, some advertising (for example recruitment, health and safety) might be specifically approved to continue by the Head of the GICS, in consultation with Central Secretariat, Cabinet Office.''

There is a real concern that the Government could get themselves into trouble if they were to begin their advertising campaign and start sending out cheques in the middle of an election campaign. Either they would be put in a position where they were subject to criticism from other political parties and the press, or the launch of the policy would be ruined. The information that the Minister and the Chancellor want to send out would not go out and the public advertising campaign would not go ahead.

New clause 11 offers a sensible way of getting around that problem by confirming that there will be no advertising of the child trust fund during a general election campaign. If the Minister does not want to go for that solution to her problem, she could go the way suggested by the hon. Member for Tatton and delay the introduction of the child trust fund for months.

Ms Ruth Kelly (Financial Secretary, HM Treasury; Bolton West, Labour)

I am pleased that the hon. Member for Tatton has taken so much interest in the proceedings of the IPPR conference at No. 10, and I am sorry that he was not invited, given his enthusiasm for the subject. However, if he ever decides to cross the Floor, I shall make sure that he is invited to future such events. I should make it clear to the hon. Gentleman and the Committee that the Home Secretary was at the conference because he is a leading advocate of asset-based welfare; indeed, he recently wrote a book about the future of Labour politics, which referred in detail to his plan.

Mr David Laws (Yeovil, Liberal Democrat)

I am grateful to the Minister for raising that point and telling us about the Home Secretary's involvement. Will she confirm that he was recently critical of the Chancellor's proposals for the CTF account because of the lack of up-front money being paid into it?

Ms Ruth Kelly (Financial Secretary, HM Treasury; Bolton West, Labour)

I am glad that the hon. Gentleman has endorsed the point that the Home Secretary is an enthusiast for this policy; it is one that he seems to have missed on previous occasions. The Home Secretary urges us to look at asset-based welfare across Government. He is particularly interested in the child trust fund and has publicly welcomed the fact that we are introducing it.

I am surprised that the hon. Member for Tatton is now publicly suggesting that we break our manifesto pledge of the last election, while his leader is trying to mount a case—which I do not accept—that that is a touchstone of a Government's credibility. Perhaps, for the sake of consistency across the Opposition Benches, the hon. Gentleman should think carefully about urging us to break a manifesto pledge.

Clearly it takes time to deliver a policy. We pledged ourselves to the child trust fund just before the general election campaign in 2001. It has taken some years to bring it into operation, but it is important to introduce it now in the current Government's term.

Mr George Osborne (Tatton, Conservative)

Is the Minister therefore confirming that the general election will be in the spring of next year?

Ms Ruth Kelly (Financial Secretary, HM Treasury; Bolton West, Labour)

Of course I am not; I am simply saying that we are aiming to introduce the policy under this Government.

We must also recognise that there is a trade-off between the value of the accounts at maturity and the time taken to maximise the planning and targeted help that the Government have chosen to give to children in poorer families. We have concluded that it is right to give top-up payments to children in the poorest 35 to 50 per cent. of families not just at birth but at the age of seven, leaving open the possibility of doing so on

future occasions too. The Committee has already debated whether seven or five is the appropriate age, and I think that I made a fairly persuasive case for seven.

I was a little surprised that the hon. Member for Yeovil felt that new clause 11 was necessary. During any general election campaign the Government retain their responsibility to govern, and essential business must go on. It has long been the practice that, where possible, activities such as advertising are stopped for the duration of the pre-election period. The period starts when the Prime Minister calls a general election and asks the Queen for the dissolution of Parliament, and it ends once the result of the election is known. Under those rules, the operation of the child trust fund would continue during an election campaign, but any advertising surrounding its launch would cease.

Mr David Laws (Yeovil, Liberal Democrat)

I am grateful to the Minister for confirming that there would be no advertising of the child trust fund during an election campaign, which I think was what she said. Would a leaflet sent out with a CTF voucher count as advertising?

Ms Ruth Kelly (Financial Secretary, HM Treasury; Bolton West, Labour)

It is essential to the operation of the policy that parents are well informed when they receive the voucher and have the opportunity to open a CTF account. That is at the heart of the financial education programme embedded in the Bill. Clearly, during such a period, the child trust fund information pack would be distributed to all parents, and I would be very surprised were the hon. Gentleman to suggest that we should not distribute such an information pack.

Mr Michael Jabez Foster (Hastings & Rye, Labour)

Would it not be important to let parents know that should they vote Liberal Democrat, for example, they may not get the cheque at all?

Ms Ruth Kelly (Financial Secretary, HM Treasury; Bolton West, Labour)

I am sure that my hon. Friend will campaign hard on precisely such issues. Parents need a basic level of information to allow them to make sensible choices on behalf of their children. I would therefore urge the Committee to reject the amendment.

Mr George Osborne (Tatton, Conservative)

I am sorry that I was not invited to the IPPR summit, and I am sorry that one has to be a member of the Labour party to be invited to such a summit. I thought it was an open and independent think tank, but apparently not.

I thought that the Minister's resting on the manifesto pledge was—of all times in this Parliament—a particularly weak argument with the tuition fees coming up. I have to concede that Treasury Ministers, particularly those at the top, are doing their best to ensure that the Government stick to their manifesto commitments. The Minister is making a mistake in not keeping open the option of delaying the introduction of the scheme. I suppose she does have the option in a sense: she can decide when it is introduced.

There is a huge amount of administrative work to be done, and the financial providers have a tight timetable to work to. We still do not have the detailed

regulations, and since we now know the date of the Report stage, the Minister does not have much time to come up with those regulations before the Bill leaves the House, which in an earlier sitting she made a commitment to do. She, too, has a tight timetable.

The last thing that anyone who supports child trust funds wants is for the scheme to be launched in a period of administrative chaos. There will be some chaos if there is a general election, as the hon. Member for Yeovil makes clear, because half of the advertising campaign would not be allowed to happen. The Minister has made it clear that she sees the launch of child trust funds as a great opportunity to carry out a huge amount of advertising, financial education and so on. That opportunity would be lost, and simple administrative chaos might ensue, besides the fact that the Minister would not be in her Department.

All I am trying to do is ensure that the policy succeeds; I merely suggest that it be delayed until the autumn. However, the Minister has turned down that offer, and I suppose that the proof of the pudding will be in the eating. We will see whether everything will be up and running, as she says it will, on time, on budget and without the problems that some of us fear. I hope that she is right. I am not going to press the matter to a Division, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 27 ordered to stand part of the Bill.

Clauses 28 to 31 ordered to stand part of the Bill.