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Mr. David Laws (Yeovil) (LD): We have had a good airing of the issues surrounding new clauses 1 and 2 and their associated amendments today, and we discussed the same issues in Committee, so I can keep my comments relatively short. The hon. Member for Tatton (Mr. Osborne) highlighted the two issues in the provisions: first, early access for parents of children with terminal illness; and secondly, the circumstances described by the hon. Member for Witney (Mr. Cameron)—early withdrawal and the terms under which parents or responsible adults of disabled children can put moneys into the child trust fund accounts.
In common with the hon. Member for Tatton, I hope that the Minister will confirm today that the Government will introduce regulations to deal with the problems facing parents of terminally ill children. I understand the Government's earlier comments and their concerns about the difficulty of implementing a particular scheme, but the hon. Member for Tatton has dealt with the point in stressing that we are talking about only a relatively small number of children. His new clause 2 is very good—something of a Rolls-Royce of its type, with excellent drafting on the involvement of medical practitioners. It contrasts powerfully, I am afraid, with my own amendment No. 58, which looks merely at the reassignment of child trust fund accounts for this particular category of children. I happily support new clause 2, and I hope that no Division will be necessary. I know that the Minister spoke with understanding and sympathy in Committee and I hope that she can give us the undertakings that we seek on that matter today.
The Minister has more difficult issues to deal with in respect of new clause 1 and the associated amendments tabled by the hon. Member for Witney. I set out our
views in Committee and I have considerable sympathy and understanding for the hon. Gentleman and, indeed, all individuals who have care of disabled children. That is why I have an instinctive sympathy with his new clause. I also have sympathy with it in speaking for a political party that is sceptical about the whole value of the child trust fund accounts and believes, as the hon. Member for Witney put it, in giving more power to parents rather than to the state.As I said in Committee, I wonder whether new clause 1 cuts away at the basis for a child trust fund account, which is essentially to lock away a pot of money from birth to the age of 18 and prevent its use even where the parent might decide that the money could be used more effectively during the childhood period than at the age of 18. One could also imagine urgent circumstances in which parents whose children are not disabled might wish to draw early on the child trust fund account. That applies not just in the tragic and extreme case of terminally ill children—other aspects of deprivation could lead a parent to decide that the moneys could be better utilised rather than being tied up in the child trust fund account up to the age of 18. The key issue is whether the parent might want to put moneys into the fund account in the first place or, as mentioned by the hon. Member for Witney, choose to use a different account to accumulate funds—a more accessible account, but with similar tax advantages.
I hope that the hon. Member for Witney understands that I have complete sympathy with the purpose of his new clause and that I hope that the Minister will give ground on it, not least because it underlines some of the weaknesses of the child trust fund account in denying access to people and children who could use some of the moneys in a far more effective way.
The Financial Secretary to the Treasury (Ruth Kelly): I am sure that the whole House would wish to congratulate the hon. Member for Witney (Mr. Cameron) on his new arrival. We should also pay tribute to him for the way in which he spoke about his first son and how he brought his personal experience to bear on circumstances in which many parents find themselves. I am sure that, in listening to his arguments, we all feel that he made a persuasive and powerful case on their behalf.
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The hon. Member for Witney argued that parents of disabled children should be allowed to access child trust funds before the child reaches the age of 18—in the best interests of the child. He also argued that the annual limit on contributions should be higher than the currently proposed £1,200 limit. I have given much thought to his proposal and I understand his arguments. I shall not repeat the arguments in favour, because the whole House has heard them set out very persuasively and they will be available for all to read in Hansard. People who follow the events of the House can read them there.
I am not going to argue that support for disabled children has increased markedly since 1997—in financial and non-financial aspects—even though it has. The hon. Gentleman brings a different argument to bear, which has wider implications than the provision
that the Government have made on this matter. However, I want to expose the House to some of the Government's thinking on the subject.The first major question that we have to answer is whether the child trust fund is the most appropriate vehicle for well-wishers, friends and the local community to invest money on behalf of a child. Is there an argument for the £1,200 limit to increase so that well-wishers and relatives can add further contributions beyond that already proposed? Having looked into those questions, I concluded that there is no real tax advantage to be gained, because contributions to children's savings accounts by anyone other than a child's parents are not affected by the income tax settlements legislation. In other words, the child can incur interest on an account in excess of £100 a year if the gift of that money, or that endowment, is provided by relatives and friends rather than the child's parents.
If the purpose of increasing the limit is for others to contribute to the child trust fund, there is no inherent reason why the child trust fund route is appropriate because the tax advantages are already in the system. It would be possible to open an instant access account for well-wishers and others to invest on behalf of the child. Indeed, an endowment of £65,000 could be built up without triggering the income tax threshold of the child, so a fairly substantial sum could be built up by well-wishers and relatives in that way. It would be possible for disabled children to have twin accounts—a child trust fund account with the initial Government endowment building up so that the child has an asset at the age of 18, and a parallel account built up so that parents can have instant access to the money whenever they judge it the most appropriate moment to use it.
Given that there are other vehicles that also have tax advantages, should the aims of the child trust fund be skewed or distorted to the potentially very good end of giving the parents of disabled children access to the account? I have considered at least three questions that have a bearing on this matter. First, will disabled children feel disadvantaged if parents decide to access the account before their children reach 18 years of age? This question is relevant to the comment of my hon. Friend the Member for Lancaster and Wyre (Mr. Dawson), who said that children at 18 need to develop autonomy and responsibility, and that they should have a financial asset to back them up.
The question is also relevant to the Barnardo's argument, raised by the hon. Member for Witney, that disabled children aged 18 face greater transitional costs. Those costs need to be met, and parental access to the account before children reached 18 could raise questions about whether the account had been run down. Would children feel disadvantaged if parents were able to access the accounts? The hon. Gentleman argues that more money might be invested in the child trust fund to start with, but that is open to debate.
Secondly, would the growth of the initial endowment be diminished by possible early or frequent withdrawals? If that happened, the endowment built up over time would be lower.Thirdly, would stakeholder child trust fund accounts still be the appropriate vehicle for disabled children? That question was touched on by the hon. Member for Angus (Mr. Weir). Stakeholder accounts are primarily equity based, and lifestyling requirements mean that they move from riskier assets in
a child's early years to safer ones later on. Would those factors be appropriate in an account with the potential for early access? I think that the answer is probably not, but I can reassure the hon. Gentleman that it would be possible for parents of disabled children to choose a non-stakeholder, cash-based account instead.
Mr. Weir: A parent may want to access an account fairly quickly. Stakeholder accounts are based on equities and depend on the state of the market at any given time, so it might not be feasible or reasonable to access them. Would it not make more sense to have the money in a more easily accessed account from the beginning?
Ruth Kelly: Of course, parents could choose a cash-based account at the outset, but there is nothing to stop them transferring the fund from an equity-based account to a cash-based account. The regulations make it clear that no exit penalty would be attracted, and I would like to think that the process would cause little delay. I hope that the hon. Gentleman is reassured on that point.
The next set of questions has to do with proportionality. Would the administrative burden on providers and the Inland Revenue be proportionate to the policy objective, given that other vehicles exist for achieving that objective? The initial proposal from the hon. Member for Witney was that receipts could be provided by the families of disabled children. They would be checked, and it would be for the Inland Revenue to determine whether it would be in the best interests of the child to part with the money.
The proposal would involve a significant administrative burden. Moreover, it is at least arguable that that burden would not be proportionate to the policy objective. However, I have undertaken to consider whether there might be less labour-intensive ways to achieve the same goals, and whether restrictions or safeguards could be built in, along the lines suggested by the hon. Member for Tatton (Mr. Osborne). Such possibilities raise different sets of questions.
Finally, what is the constituency of support for this sort of change? Is there a demand—among disabled people, the parents of disabled children and disability groups—for the proposal? In Committee, I promised to consult disability groups on the matter. The hon. Member for Witney read some of the responses that he has received from disability groups. The response has been somewhat mixed, and it is not clear that the proposal has a strong basis of support.However, I undertake to consider the arguments further and to have a more in-depth consultation with disability groups. If a consensus emerges for the changes that have been proposed, I shall undertake to consider them seriously to see whether a sensible change can be implemented that would satisfy all concerned.
I am afraid that I cannot give the hon. Member for Witney a greater assurance than that at this stage, but I certainly agree to meet him over the coming weeks. I want to continue to engage him in the work on taking this agenda forward. I hope that we can persuade him of the rightness of the changes that we propose to make.
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