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Orders of the Day
Child Trust Funds Bill
Lords amendments considered.
Mr. Deputy Speaker (Sir Alan Haselhurst): I inform the House that privilege is involved in Lords amendment No. 7. If the House agrees to the amendment, I will arrange for the necessary entry to be made in the Journal.
Clause 1
1.39 pm
The Financial Secretary to the Treasury (Ruth Kelly): I beg to move, That this House agrees with the Lords in the said amendment.
Mr. Deputy Speaker: With this, we may take Lords amendment No. 2.
Ruth Kelly: Looked-after children include some of the most disadvantaged children in our society, and we are committed to ensuring that they are fully included in the child trust fund arrangements. Although the majority of looked-after children have someone with parental responsibility, some have no one with such responsibility who can give instructions on their behalf for their child trust fund accounts—for example, orphans with no legal guardians. There are also some circumstances in which it would be inappropriate for someone with parental responsibility to give instructions for the management of a child trust fund account of a looked-after child—for instance, when contact between a child and a parent had been terminated because of serious abuse.
I said in Committee in January that we were exploring the possibility of involving the Official Solicitor. The amendments are the result of that work. Without them, there would be no one to give new instructions to the account provider for child trust fund accounts until the children reached the age of 16, when they would be able to give instructions themselves. There are a number of good reasons why it is desirable to have someone who could do that, and could make relevant decisions. For example, a child's religious or ethical beliefs may not accord with the type of child trust fund account that he or she has, or with the type of investments used in the account. Alternatively, an account provider may be underperforming in investment terms compared with other providers, so a move to a different provider may be called for.
The amendments would allow the Official Solicitor to be appointed to manage the child trust fund accounts of such children. I urge the House to support them.
Mr. George Osborne (Tatton) (Con):
It is good to be back at the Dispatch Box talking about this Bill—it brings back memories of cold, dark January days in Committee.
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Before I deal with the detail of the amendments, I want to say something about timing, in which I think the Official Solicitor would also be interested. I hope that today will mark the Bill's last legislative hurdle—we must wait and see—but one major piece of the jigsaw is missing: a piece that is relevant to the Official Solicitor, and the new responsibilities that the Government want to give him or perhaps, in the future, her. It is, however, of greater interest to the providers. I have spoken to some of them in the past week, including the chief executive of one of the largest likely providers. What concerns them, and may concern the Official Solicitor, is the sales regime for child trust funds. That is the last major piece of the jigsaw.
We, and the providers, were told that the Financial Services Authority's consultation paper on the sales regime was due to be published by the end of April. This is the second delayed deadline since the end of last year. We are almost halfway through May, and there is still no sign of the paper. When does the Financial Secretary expect it to emerge? Will it have to go to her before being published? I am not sure what procedure will apply in her office.
Will the Financial Secretary confirm that when the paper is published, there will be a mandatory three-month consultation period in which people, perhaps including the Official Solicitor, will be able to make representations? If so, even if the paper were published this week, the consultation period would run until mid-August. That makes it extremely unlikely—and I am being generous here—that a decision on the sales regime would be made until the end of September. We are therefore very close to the deadline for getting the scheme up and running. The providers must start registering with the Inland Revenue by October or November, and from January they need to be in a position to accept applications from children born between September 2002 and April 2005.
1.45 pm
That is a tight deadline. It was tight when we were discussing this in Committee and on Report, but it is even tighter now, and we still do not have the sales regime. That is causing considerable concern in the industry, and is relevant to the Official Solicitor's responsibilities. When I spoke to the Association of British Insurers this week, I was told:
"The lack of information on the sales regime hinders providers' ability to take an informed decision on market entry—for example, we don't know if the CTF will be covered by the Sandler sales process or not. Early announcement of the charge cap which will apply to the CTF was welcome, but without the details of the sales regime providers will have an incomplete picture with which to consider offering the CTF . . . the timing of the publication of information on the sales regime is, at the very least, unfortunate."
The ABI is one of the most important groups representing the financial services industry, and is obviously important to the success of child trust funds. Unlike the Liberal Democrats, the official Opposition have supported the Bill throughout its passage so far, and we want child trust funds to work; but we are becoming increasingly concerned about the tightness of the timetable. When we read in the press that large providers such as the Pru and Legal and General have decided not to offer child trust funds, it is clear that we must do all we can to make them as attractive as possible
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to other providers, given the Government's restrictive decisions on such matters as the charge cap. The sales regime will be crucial to that. Will it be complicated or straightforward? I hope the Financial Secretary will say something about it, because I think it will be of broader interest.
Mr. Deputy Speaker: Order. I am sorry to interrupt the hon. Gentleman, but we must try to keep the debate within the confines of the amendments. I hope he will not seek to persuade the Financial Secretary to respond to a broad Second Reading-type debate.
Mr. Osborne: I would not dream of doing so, Mr. Deputy Speaker.
I am sure that the Official Solicitor, Mr Laurence Oates, will follow our proceedings, because he will have to make some of these decisions. The Financial Secretary talked about his role in Committee, or at least hinted at it. In fact, it was a bit confusing at the time. As the Financial Secretary knows, I have a great deal of time for her. We have just been sparring against the big beasts of the political jungle together during Treasury questions—her against my right hon. Friend the Member for West Dorset (Mr. Letwin), the shadow Chancellor, and me against the Chancellor of the Exchequer. In Committee, however, she kept referring to the Solicitor-General rather than the Official Solicitor. Mr. Laurence Oates is not, as far as I am aware, the right hon. and learned Member for Camberwell and Peckham (Ms Harman), and I doubt that either he or she would have been too impressed. But I shall put that slip to one side.
In Committee, the Financial Secretary said she was considering giving the Official Solicitor some kind of role to act on behalf of children in care. Will she expand on that a little? In her speech today, she did no more touch on what may be a very significant issue, with which I shall deal in a moment.
Will the Official Solicitor be able to act in the circumstances suggested by the hon. Member for Yeovil (Mr. Laws) in the debate in Committee? Those of us who served on the Committee will remember his rather lengthy dissertation on the performance of the Japanese equity market.
Mr. David Laws (Yeovil) (LD): It was concise.
Mr. Osborne: That depends on the definition of "lengthy" and "concise". It might have been concise by the hon. Gentleman's standards, but it was lengthy by everyone else's.
The hon. Gentleman made the serious point that in future equities could seriously underperform because of a crisis or prolonged slump in the equity market. Under the Bill as drafted, some children in care for whom the Official Solicitor will be acting will be forced into having an equity-based child trust fund account—a stakeholder account. We also discussed that in Committee. The hon. Member for Yeovil asked who, in circumstances in which there had been a prolonged equity slump, would decide on behalf of those children in care that it would be a mistake to go on using equity accounts. At a time when every other child in the country would be going into other accounts, such as cash accounts, because their
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parents would be sensibly making the decision not to put their child's future nest egg into the equity market, children in care, who, as the Financial Secretary said, are among the most vulnerable in our society and often have the smallest financial assets, would continue to be pumped into those equity accounts.
Will the Official Solicitor be able to make a broad decision that, at some future point, all the children in care whom he is looking after will no longer have to have an equity-based child trust fund? That will be a huge decision for him to take, and that raises the question of whether Mr. Laurence Oates is qualified to make it. He is no doubt an extremely well qualified lawyer, but he is not a financial adviser. On what grounds is he qualified to make an investment decision on whether the account of a child in care is best invested in the equity market or the bond market? The Official Solicitor is not in a position to make a qualified judgment on that.
That brings me to a point that the Financial Secretary made in her brief remarks. She put to the House the possibility that there might be an underperforming account provider and that children would not therefore have their child trust fund accounts placed with that provider. Again, I am not sure whether the Official Solicitor is in a position to make a judgment on whether an account provider is underperforming. Who will decide that? Will it be the Official Solicitor's responsibility to gather information from all the various financial providers and then decide that because a certain provider is underperforming, he will not allow any child trust funds of children in care to be placed with it? On what grounds can he take that decision? He is not a financial adviser and does not have financial expertise. Will the Inland Revenue take the decision and make a recommendation to the Official Solicitor? Will the Official Solicitor then be required to accept that recommendation, or will he make a judgment on the Revenue's advice? The issues are complex, and if we are going to give the Official Solicitor this important role, we need more clarification than we have so far had on exactly what role he will have in those decisions.
Will the Official Solicitor have the power to remove accounts, or to decide not to place child trust funds with a particular provider? I remember from our discussions in Committee that the child trust funds for children in care will be allocated to providers on a rota basis. If a provider is underperforming, will it be taken off the rota, or will it still be awarded the account, only for the Official Solicitor almost immediately to remove the account from the provider?
Those are important decisions, and I do not think that the Government have offered a convincing explanation on them. When I looked at the House of Lords Hansard, I read that Lord MacIntosh of Haringey was even briefer than the Financial Secretary in his explanation. He merely said that the Official Solicitor could
"give instructions . . . regarding a child's trust fund account"—[Official Report, House of Lords, 18 March 2004; Vol. 659, c. GC176.]
in situations where it was deemed "necessary or desirable". There was no explanation of what exactly necessary or desirable meant.
Amendment No. 2 says that the Official Solicitor can act only for children under 16. Of course, the fact that children aged 16 and 17 are going to be able to manage
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their accounts is my single biggest achievement since becoming a Member of Parliament. I persuaded the Government to change their mind on that, so I am not going to suggest that they undo their fine work. I will go to my grave knowing that I have changed the course of our nation. However, many children in care are there because they have, unfortunately, disabilities—some physical, but others mental. It is not clear to me that every child of 16 with mental disabilities will be able to manage their child trust fund account, and that is more likely to be the case for some of the young people whom the Official Solicitor represents. What will be the position of such 16 and 17-year-olds, where the person acting for them is not a parent or relative, but the Official Solicitor? Will there be circumstances in which he will continue to manage the account when a child is 16 and 17, to make sure that they get the benefit of a child trust fund account at 18?
It seems strange that that age has been written into the legislation, with no explanation of what will happen. I suppose that that also applies to some children who are not being looked after by the Official Solicitor. Since the Government changed their mind on reducing the age from 18 to 16 in England, Wales and Northern Ireland, I have not seen what they propose to do with 16 and 17-year-olds who are not capable of managing their own accounts, or who they intend will act on behalf of those young people. However, that is of particular relevance to this debate because of the role of the Official Solicitor in the matter.
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