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5.47 pm

Mr. David Laws (Yeovil) (LD): I hate to break up the emerging cross-party consensus on the Bill. However, Liberal Democrat Members believe that it is yet another of the Chancellor's well meaning but flawed initiatives. It represents more of the serial micro-meddling that he has introduced since 1997 and is not good value for money for scarce public funds. We shall therefore vote against the proposals.

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I agree with the comments of a right hon. Member after this year's Budget statement:

Those were the words of the then Leader of the Opposition. Conservative Front-Bench Members appear to have changed their position somewhat. Their former leader described the proposals as over-complicated and said that they would achieve little, but the hon. Member for Tatton (Mr. Osborne) said today that the Bill was welcome and long overdue. I refer him to the former Conservative Chancellor, Lord Lawson, who represented Blaby. He had a good principle for his tax policy: simplicity. It has never been high on the current Chancellor's list of priorities.

The child trust fund is an ill-considered and under-evaluated initiative in the tradition of the film industry tax relief, which was established several years ago as a modest measure but now costs hundreds of millions of pounds. It is in the tradition of the many loopholes that the Chancellor has introduced in every Budget and pre-Budget report. All those tax loopholes seem to have only one thing in common—they cost a great deal of money and nobody, certainly not the Treasury, has the slightest idea of what they do, in practice, that is of value to the economy.

Mr. Cameron: Conservative Members are enjoying a lecture on consistency from the Liberal Democrats—that is always worth while. Has the hon. Gentleman analysed the incentive to save in relation to introducing a local income tax? Does he think that that would have an impact on savings?

Mr. Laws: No, I do not. I will not be detained by the hon. Gentleman, who is trying—most improperly, Mr. Deputy Speaker, as I am sure you agree—to encourage us to make a detour.

Several hon. Members referred to the Treasury Committee's report on the child trust fund. When the hon. Member for Dumbarton (Mr. McFall) talked about what was said by people who were consulted on that report, he cited favourable comments from certain bodies that appeared to be financial institutions. As someone who has worked in a financial institution, I suggest that we must not regard advice from that quarter as necessarily wholly impartial, because those institutions have an interest in seeing this product, like other financial market products, take off.

In order to persuade the House that our objections to the Bill are not simply party political, I refer hon. Members to one of the more independent memorandums submitted to the Treasury Committee—the memorandum from the Institute for Fiscal Studies.

Mr. George Osborne: The hon. Gentleman tried to pick me up on what other Conservatives have said. I am right, am I not, that there is a Liberal Democrat member of the Treasury Committee, who, I am told privately, might serve on the Standing Committee with us? That

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would be interesting, given that that Committee supports the principle of the child trust fund. I wonder how he will vote tonight.

Mr. Laws: The hon. Gentleman should not read too much into the Treasury Committee's report, given that one of its members, the hon. Member for Wallasey (Angela Eagle), said during its hearings:

proposal. Instead, I refer the hon. Gentleman—I am sure that as an assiduous reader he has already looked at it—to the memorandum submitted by the Institute for Fiscal Studies. That body is almost certainly the most independent and authoritative voice in relation to much of the UK's tax and economic and social policy, and cannot be considered to be speaking from any particular self-interest, yet it concluded in its memorandum that the child trust fund policy has not been satisfactorily justified. It went on to say:

It continued:

I should like to cover three issues. First, this is, as my hon. Friend the Member for Richmond Park (Dr. Tonge) said, a question of priorities. At this particular time, does this measure represent the best use of what is, as the hon. Member for Dumbarton acknowledged, a very large amount of public money? Secondly, does the substance of the proposals add up, and are they likely in practice to achieve the objectives that, according to the Bill, the Government desire? That is the specific matter that was commented on by the Institute for Fiscal Studies. Thirdly, I want to look briefly at some of the Bill's details. Although we oppose it in principle, we will do our best in Committee to take part in debates constructively and to suggest amendments that may move the Government's proposals in a more sensible direction.

We should start by considering how much the Government plan to spend on the proposals and whether that expenditure is justified. The context of today's debate was established last week by the Chancellor's pre-Budget report, in which he unveiled a public borrowing figure of £37 billion for the current fiscal year—a figure that is significantly above the 3 per cent. that the Government previously regarded as a commitment on public borrowing. In addition to that very high figure, the Chancellor unveiled future forecasts for public borrowing that indicate that he will need to borrow some £150 billion over the five years from 2003 to 2008. Against that background, it cannot be anything but obvious to every hon. Member that next year we are in for an extremely tight and difficult public sector spending review when the Chancellor sets the spending figures for the three years starting in 2005–06. It is therefore incumbent on us all to consider not only whether there may be some merit in each individual scheme brought forward by the Government, but whether the merit of a particular scheme is greater than the alternative uses to which the money could be put.

The Financial Secretary will perhaps confirm that the cost of the scheme over the next 10 years is likely to be some £3 billion, which consists of the £235 million up-

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front costs of issuing the vouchers to each child who qualifies; the introduction in 2009 of a top-up—the cost of which is yet to be quantified, but is likely to be at least £100 million—to children who have reached the age of seven; further administrative costs that the Government have yet to detail, but which will have to be incurred each year; and set-up costs in relation to information and communications technology. The explanatory notes to the Bill tell us that implementing the child trust fund will involve significant new one-off setting-up costs, mainly because of the need for IT support. I should be grateful if the Financial Secretary clarified the order of magnitude of those costs and whether they are still in line with the figure that was given to the Treasury Committee—that is, some £90 million a year.

At least two other costs will fall on the taxpayer: first, the tax relief on savings that will be triggered as a consequence of the measure—the Financial Secretary's evidence to the Committee suggests that she considers that that cost will be very small—and, secondly, the significant advertising campaign that will, as ever, be undertaken by the Government. Will the Financial Secretary give some idea of how much that will cost?

All those costs and all the money that flows from them will not make an iota of difference to child poverty. The Prime Minister said when he appeared at the launch of the child trust fund policy in April 2001:

However, the investment that is going into the child trust fund will not make any difference to children's opportunities. It will not affect children at school or by directing additional money to their parents. It will be a barren investment that is locked away until they reach the age of 18.

Mr. Andrew Love (Edmonton) (Lab/Co-op): The hon. Gentleman will be aware that, in his pre-Budget statement, the Chancellor announced other measures that will have a direct and immediate effect on child poverty. Is it not sensible that he should plan for the future, so that we can deal with child poverty in several different ways?

Mr. Laws: I am grateful to the hon. Gentleman for his sensible intervention—he makes a fair point. In some respects, the Government are seeking to push ahead with reforms that we very much welcome: for example, the children's centres that were announced—or perhaps re-announced—in the pre-Budget report. However, the point at issue for Liberal Democrat Members, and the reason why we do not believe that the expenditure on the child trust fund is justified in comparison with potential alternatives, is the slowness of the roll-out of some of the other measures that the Chancellor and the Government are promoting—specifically, children's centres. One of the best things that the Government have done over the past few years is to establish the Sure Start scheme, because intervention in the very earliest years is the only way in which we will really be able to challenge the enormous inequalities of opportunity in society.

My criticism of the Government is that, although they rightly start by targeting the areas of greatest deprivation, all too often, they make the mistake of

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thinking that the type of deprivation that they are seeking to tackle through the children's centres and the Sure Start schemes is restricted to the most deprived wards in the country. I represent a constituency whose deprivation levels would be considered average. None of its wards appears among the 20 per cent. most deprived in the country. However, there is a crying need in the most deprived wards in towns such as Yeovil and Chard for initiatives such as children's centres and Sure Start schemes, which are being rolled out in some parts of the country but not in others.

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