Clause 31 - Management of child trust funds: looked after children

Deregulation Bill – in a Public Bill Committee at 11:30 am on 13th March 2014.

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Question proposed, That the clause stand part of the Bill.

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

The child trust fund is a tax-advantaged cash or stocks and shares account created by the previous Government to provide eligible children with an asset when they reach adulthood. There are some 6 million CTFs in existence, and most accounts are managed by parents of the account holder. Currently, only the Official Solicitor and similar Government bodies can manage the CTFs of those looked-after children for whom there is no suitable person with parental responsibility to do so. Those bodies manage some 9,000 accounts, and their management responsibility includes instructing providers on the investments to be held in the account and on account transfers, as well as periodically reviewing whether each child has the most suitable account.

The clause amends the Child Trust Funds Act 2004 to permit a wider range of organisations, including third sector bodies, to be authorised by regulation to manage CTFs for looked-after children. It also provides for the payment of such organisations and for the transfer of relevant information relating to the accounts. The clause reflects the fact that a number of organisations in addition to the Official Solicitor have proven expertise in the field, including third sector organisations committed to the welfare of vulnerable children or to developing financial awareness.

One such body, the Share Foundation, already manages junior individual savings accounts for eligible looked-after children under a scheme created by the Government. As well as managing the accounts, the foundation also solicits additional charitable donations for them and provides for the financial education of account holders, many of whom could face significant challenges when they leave care.

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

On the point of financial education, does the Minister agree that child trust funds are particularly important to looked-after children? They do not have many of the support mechanisms in place that many other children can rely on. What specific assessment has been made of the challenges that face looked-after children with child trust funds and financial education in general?

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

I thank the hon. Gentleman for that intervention. I will hopefully cover those points shortly, and if not, I will write to him to clarify the range of things that the Government are doing.

The Government wish to explore whether opening up the CTF management role held only by the Official Solicitor to a broader range of organisations might benefit looked-after children holding CTFs, in the same way that the Share Foundation is already doing for thousands of looked-after children with junior ISAs. The clause therefore provides the basis for the Government to open discussions with a range of bodies to see whether changes to the current arrangements would benefit looked-after children holding CTFs. Any such changes will be subject to appropriate safeguards and appointment processes, and will be driven by what is best for the children who hold the accounts. They are some of the most vulnerable children in the country.

At this point I mention that Paul Goggins campaigned on these issues, and it might be appropriate to recognise the role he played in promoting this important agenda. I commend the clause to the Committee.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Cabinet Office)

It is a pleasure to serve under your chairmanship, Mr Hood. It is something of an unexpected surprise that I am speaking this morning. The Committee will be sorry to hear that my hon. Friend the Member for Dunfermline and West Fife is unwell today. He was going to speak on these important clauses. It is clearly beyond my capability to replace him in any way, but I hope to offer the same level of scrutiny, which the clauses deserve and I am sure the Minister seeks.

As the Minister said, child trust funds were a campaigning issue for our right hon. Friend Paul Goggins, who unexpectedly died over Christmas. I echo the tribute paid by the Minister to Paul Goggins and to the importance of child trust funds in many young people’s lives.

Child trust funds are savings and investment accounts for children born on or after 1 September 2002. They were instituted by the previous Government to try to address the unfortunately continued presence of inequality in our society that starts at or indeed before birth; research shows that parental income is one of the key factors in determining the life chances of children. I am sure that all hon. Members would support the principle that every child should be equipped to reach their full potential and that that should, as far as possible, depend on their own talents, not the income and financial circumstances of their parents.

Photo of Oliver Heald Oliver Heald The Solicitor-General

Would the hon. Lady recognise that capital has a part to play, and that part of the thinking behind child trust funds was to have some money behind the children, to start the savings habit and to encourage the idea of being a property owner?

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Cabinet Office)

I thank the Solicitor-General for that supportive, if slightly disingenuous, intervention. I certainly agree that starting a savings habit was part of the thinking behind child trust funds. Saving for and investing in the future were clear principles for Labour Governments, as we have seen.

Child trust funds aim to give children of all backgrounds, particularly vulnerable and looked-after children, the potential for some of the advantages and financial backing that others in more fortunate circumstances might have.

We find the clauses to be generally reasonable. Given that one of the first actions of this Government was to abolish child trust funds, in concert with measures that cut child benefit by £129 a year for more than 7 million families and scrapped support for families with young children, costing families more than £1,000 at a time when costs are rising in the ongoing cost-of-living crisis, we feel that the measures are reasonable to support the continued effectiveness of the funds. We will therefore not oppose the clause.

However, I would like to hear from the Minister, as my hon. Friend the Member for Chesterfield suggested, more details on what the substitute will be for the beneficial impact of trust funds on looked-after children. I would also like to know more about the support for such children, which is not required to extend beyond the age of 18. There have been campaigns to change that so that looked-after children can have more support and advantages to overcome the specific inequalities affecting their life chances.

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

I think the hon. Lady is far too modest in saying that she will be unable to replicate the competence shown by the hon. Member for Dunfermline and West Fife. Indeed, she has done just that in her contribution this morning. She commented on the fact that one of the first measures the Government took was to abolish the CTF. She will be aware that when the Government came to power we had certain issues to address, notably the fact that for every £4 the Government were spending, £1 was borrowed. More than 7% of the value of our economy had been wiped out and so we had to introduce measures which she does not support.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Cabinet Office)

I am sure, Mr Hood, that you do not want us to replay the debate over the financial crisis, which had such an impact on our economy. I am sure the Minister will agree that it was not child trust funds that caused the financial crisis.

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

I thank the hon. Lady for that intervention. The problem with what she has just said is that if she makes a series of similar remarks about a number of other measures, then the total bill associated with all the measures that she thinks are too small for the Government to have needed to take action on, amounts to a very large bill that the Government would have to continue paying. That is not the purpose of the debate this morning. I am sure, Mr Hood, that you will want me to constrain my remarks to the clause before us. The hon. Lady made one point about looked-after children. My understanding is that the rules have changed in terms of local authorities being able to give more support to children post 18.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Cabinet Office)

Being able to, but not being required to, is my understanding of how the situation stands.

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

If the hon. Lady’s understanding is correct then both she and I would want local authorities to provide that support beyond 18. On almost all the criteria that one uses to assess looked-after children, they are under a great deal more pressure than children who are not looked after. We need to do everything we can to support them. My local authority—I am sure  hers does too—puts great emphasis on supporting looked-after children. There are regular events which I attend where they praise the achievements of looked-after children to ensure that they get support from the wider community for their education, sporting achievements and other things they are achieving in their lives.

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills)

The right hon. Gentleman is entirely right about the additional pressures that are often on looked-after children. For precisely that reason, many looked-after children will not have a child trust fund because no one will have set one up for them in the first place. For those who have one, it is really important that that support is in place. For someone coming out of the care environment, perhaps going into circumstances that are uncertain and chaotic, being given a big bunch of money could be far from helpful. It is really important that the support is there to ensure that those child trust funds are looked after and end up being the nest egg that we intended them to be and are not something that is problematic for that young person in the future.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. That was more a speech than an intervention.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

It was a good speech, but not an appropriate intervention.

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

I will seek to deal with it briefly, Mr Hood. I agree with the hon. Gentleman. This was one of the issues that I had with child trust funds when they were set up. We would all want 18-year-olds, once they have access to those funds, to make the best possible use of them, whether that is to put down a deposit or buy a car for work purposes. But there was always going to be the risk that they would use that money in the way that the hon. Gentleman suggested, perhaps with a big party on their 18th birthday. They may feel that was a good use of the money, but perhaps it was not the intention when the fund was set up.

The Government’s purpose here is to ensure that organisations such as the Share Foundation, which already plays an effective role in managing junior ISAs for instance, could play an important role in getting even better use out of these funds for looked-after children.

On a more general point about what the Government are doing to increase financial capacity among children—not specifically looked-after children—the Government take this seriously. That is why, from later this year, financial education will form part of the compulsory national curriculum in England. It will be taught within citizenship classes for 11 to 16-year-olds, with links to financial education in maths learning. The Government’s tax-advantaged savings accounts, the CTF and the junior ISA, provide an excellent way of increasing a child’s financial capacity, enabling them to learn about saving and managing money in a safe environment.

To reassure the hon. Gentleman, all eligible children will have had a CTF set up for them. One of the Government’s big challenges is ensuring that all those  young people who have had these accounts set up for them actually know about it. As I understand it, quite a significant number are not aware that one was set up for them. There are measures to ensure that, through annual statements for instance, people are aware of it, but obviously difficulties arise when people move and may lose track of the fact that a fund was set up for them in the first place.

Photo of Toby Perkins Toby Perkins Shadow Minister (Business, Innovation and Skills) 11:45 am, 13th March 2014

Will the Minister clarify his last point? At the time when we discussed the abolition of the child trust fund, I seem to remember hearing that about 80% of children who were eligible actually had one. Is he saying that every child who was entitled to one had one, or was it the responsibility of the parents or the organisation looking after them?

Photo of Tom Brake Tom Brake The Deputy Leader of the House of Commons

What I am saying is that all eligible children will have had a CTF set up for them. If not their parents, then HMRC will have set it up for them. In terms of eligibility, they were all set up. We have had a fairly extensive and, hopefully, positive exchange on clause 31 and I commend it to the Committee.

Question put and agreed to.

Clause 31accordingly ordered to stand part of the Bill.