Examination of Witnesses (Questions 20-39)
MR IVAN
LEWIS MP, MR
TONY ORHNIAL
AND MR
MIKE WELLS
30 NOVEMBER 2005
Q20 Ms Keeble: You said there were
not specific targets but you have also said that the aim of this
was specifically to tackle child poverty and disadvantage amongst
children, so what research has the Government undertaken to establish
which parents are not cashing the vouchers?
Mr Lewis: To put it bluntly, we
are in such early stages of this project that we do not have that
data. What I believe we will have by the time the first year statistics
are collated, available, published and analysed is information
and evidence which helps us to look at the development of future
policy. In my view, that is entirely what we should be seeking
to do.
Q21 Ms Keeble: We have the latest
statistics now which are very helpful. Personally I think this
is a hugely important programme, if it works properly. If you
have 55% of parents cashing the vouchers it might be in a sense
the wrong 55% because if you are trying to tackle child poverty
then it is particularly important that the parents, where there
are pressures, are those who actually cash the vouchers. What
plans have you got to do research and find out who is actually
getting these?
Mr Lewis: What we will have is
clear evidence certainly on the basis of income and because of
the supplementary payment we will be able to identify pretty clearly
where the cohort is on the whole, not in every detail but on the
whole, that has failed to convert the vouchers into accounts.
I would say on the question of child poverty the reason that we
are not prepared to perpetuate child poverty as a consequence
of this policy is the major reason, of course, why we have got
the default mode because no child should lose out as a consequence
of their parents' inability or unwillingness to open an account
in these circumstances. I also think we have to believe in this.
The most powerful experience for me recently was when I went to
speak to four Sure Start mums in East Manchester, which is a very
poor part of Manchester, and they told me about the transformation
the child care Sure Start centre had made in terms of their lives.
They told me that they themselves were training to be child carers
to work within the centre or a similar centre. They also told
me that their voucher had recently arrived for their children.
What that had done, they said in their own words, is it had got
them to think about how they wanted their children to have much
better chances in life than they had had and how they were determined
to use the voucher/the account as a part of that process. So the
idea that the child trust fund as a stand-alone, isolated initiative
will be able to solve all the problems related to child poverty
has never been part of our case.
Q22 Ms Keeble: Nobody is saying that.
Mr Lewis: But I think what we
need to do is integrate what we learn from the child trust fund
with the development of our public policy in terms of child poverty
and also things like financial education and financial capability.
Q23 Ms Keeble: You are saying that
you will know by those parents who get the supplementary payment,
those who get the double payments because they are on child tax
credits, which group of parents or what proportion of parents
getting the child trust fund who cash their vouchers are actually
on full tax credits?
Mr Lewis: Yes.
Q24 Ms Keeble: Is that the only way
you will know by doing that calculation?
Mr Orhnial: We are also doing
a full evaluation programme around this which includes a number
of surveys which will be able to tell us more about income distribution,
but the key thing will be making the link across from finalised
tax credits awards through to the families in question because
that is solid administrative data and also from Income Support/Job
Seekers Allowance data for those who are in receipt of Income
Support/Job Seekers Allowance. That will be the most solid data.
Q25 Ms Keeble: It would be very helpful
to have information about the design of the surveys, and perhaps
that could be put in. I am very conscious that you used to be
the Education Minister and therefore know about the problems of
people with literacy difficulties, so how can a paper-based system
with a reminder which is a chase-up also in writing actually tackle
the difficulties of people who get these things through the post
and just cannot read them? You mentioned about Sure Start and
I have also been to Sure Start to talk about this and leafleting
school gates and the whole bit. What is the Government doing about
looking at working through institutions such as Sure Start to
encourage take-up and encashment of the vouchers?[1]
Mr Lewis: I think you raise a
really, really important issue. For some of the most difficult
to reach people we have to use innovative and different methods
in order to do that. As a consequence of that we have a number
of partner organisations—Sure Start, public services, voluntary
organisations, social housing providers—which we are trying
to use as a conduit to get to many of those people for whom simply
receiving, like you say, information through the post in writing
will not make the blindest bit of difference, so we are doing
that. Do I think we can do that even better? Do I think we can
have even more imaginative partnerships? I suspect we could and
we need to build on what we are doing at the moment, but there
is a recognition that for some parents simply writing to them
or communicating with them in the bog standard way will not be
a vehicle to ultimately get them to open accounts and also, of
course, to get them to make choices because part of this exercise
is to get families and parents to think about these issues and
to make choices for themselves, with support, and that is why,
as I say, being innovative and imaginative in the way we get to
the hard-to-reach financially or socially excluded families is
very, very important.
Q26 Ms Keeble: What kind of information
do you provide to parents about the child trust fund and at what
stage? What information do you provide about the different options?
Based on my previous question, I went into a Sure Start with one
of the providers once, partly by accident, but it was a revelation
for some of the parents to talk to a building society manager
about the different options. What kind of information is it and
how do you provide it?
Mr Lewis: We write to people,
we advertise on TV and radio, in the press, and on-line. We have
developed partnerships specifically with the voluntary sector.
We attend events where we are able to offer face-to-face advice
where we believe that parents are likely to be who will be in
receipt of the child trust fund. There is the use of women's magazines,
there are leaflets that are put out through organisations, and
I could list them, our partner organisations that I described
to you—Advice UK, the Basic Skills Agency (back to your
specific point), Sure Start. There is training of staff in some
of those agencies who are going to be having face-to-face direct
contact with parents who are going to be eligible for vouchers.
There is a whole range of methods that we are deploying.
Q27 Ms Keeble: But how do you think
you explain to somebody who has got difficulty in dealing with
paper work the advantages of an equity-based account versus a
stakeholder account versus a cash account?
Mr Lewis: With great difficulty.
Q28 Ms Keeble: How are you going
to deal with that if you are going to give those most excluded
parents access to the best possible savings facilities for their
children?
Mr Lewis: I believe, because of
many of the things this Government has done, lots of the parents
that we are talking about will have access to specialist support
and specialist services. Part of the role and responsibility of
those specialist services is essentially providing a tailored,
individualised offer to each of those individuals using these
services, and therefore part of that is looking at this voucher/account
and ensuring those people have access to the most professional
and appropriate advice possible. Is that easy? Of course it is
not. Is it easy for somebody to articulate this in a way in which
some people will find easy to understand? No it is not. But there
is no magic wand or quick-fix solution or easy answer to the question.
We have to try a variety of techniques. We have to ensure that
the people at the front-line who are seeking to give people the
opportunity to make these choices are able to explain it in as
simple and practical and clear a way as possible.
Q29 Mr McFall: The FSA publishes
comparative tables for products such as mortgages, saving accounts
and stakeholder pensions but it does not publish any information
on child trust funds. With a view to increasing the take-up have
you considered asking the FSA to do so? If you have not, will
you consider it after this meeting?
Mr Lewis: Yes.[2]
Q30 Mr McFall: Good.
Mr Lewis: Next question.
Q31 Mr Mudie: To go back to the £240
million that has not been allocated and which could have earned
youngsters £7.5 million, do you not think you are penalising
children because of the lack of action by their parents, and is
there not a case for actually putting a mythical interest rate
on them so that when they do take it up or they are allocated
that first year is not wasted, because if the object is to give
money to children there is £7.5 million that because their
parents are slow presumably the children are going to lose out
on.
Mr Lewis: As I understand it,
we are doing that in terms of children who were born post-September
2002 to January 2005. On the other hand, we are not planning to
do it for the post-January 2005.
Q32 Mr Mudie: Is it not worth thinking
about?
Mr Lewis: I think the point you
make is entirely intellectual, consistent and reasonable but inevitably
there is a budget.
Q33 Mr Mudie: But you have the budget,
it is simply that it is sitting earning money for the Treasury
instead of being allocated to the children, so it is not taking
up any more money, it is investing it on their behalf as you will
eventually do after 12 months.
Mr Lewis: It is certainly a reasonable
point.
Mr Mudie: Good.
Q34 Chairman: Maybe you would like
to reflect on that and come back to us?
Mr Lewis: Once I say to a Committee
member it is a reasonable point it means I have to come back on
it.[3]
Q35 Peter Viggers: Can you tell us about
the costs of the scheme? What is the overall cost and what is
the administrative cost. If you do not have those figures readily
available I would be grateful if you could write to us about it.
What I am trying to ascertain is it seems quite labour intensive
as a scheme and I am concerned—
Mr Wells: It is not labour intensive
as a scheme. We are actually using 79 staff in HMRC out of approaching
90,000 staff in the organisation, so it is a very, very small
number of people. It is a highly automated process of issuing
vouchers.
Q36 Peter Viggers: So you are saying
the Government cost is quite small?
Mr Wells: The cost in terms of
the Exchequer is obviously much larger but in terms of administrative
cost most of the cost is in the front end in terms of the IT investment
to set the process up and then the on-going running costs are
relatively modest.
Q37 Peter Viggers: Thank you. I may
pursue that point another way. Minister, I put it to you there
is a lot of information available but not very much of advice.
Do you think that parents get enough advice?
Mr Lewis: I think this is a big
picture question about savings and investments generally and the
kind of face-to-face access to professionals and advice we would
like to see develop. I think there is, of course, an issue around
that more generally in terms of policy. I hope that many of these
parents will get access to high-quality advice. For some I accept
that may not be readily available and that may make their decision
making more difficult. So I think we generally would say that
in the question of savings and investments, particularly again
for financially excluded groups within our society, we are on
an on-going mission to improve the quality and the access to advice.
Q38 Peter Viggers: Because Ruth Kelly
when she was Financial Secretary at the Treasury made it clear
that she would like to see parents consider very seriously the
stakeholder option. In fact, she said "we will certainly
be promoting the stakeholder product", yet reading across
from three of the providers, data from the Building Societies
Association shows that over 70% of parents opt for cash; Engage
Mutual Assurance shows that 53% opted for cash; and Children's
Mutual told us that 75% opted for the stakeholder. How do you
account for this disparity and do you feel those who did not opt
for stakeholder to a certain extent were failures of information?[4]
Mr Lewis: No I think we have to
respect the fact that different people make different choices
given the same information. What I think is quite pleasing is
that our statistics suggest that over 50% have opted for stakeholders,
considerably over 50%, and that is good news. Would some people
given the same information make a perfectly rational decision
in their own mind to go with cash? Yes they will. Part of this
is giving people information and advice but also not entirely
taking the responsibility away from them in terms of choices.
Q39 Peter Viggers: Have you considered
stating quite explicitly in your advice to parents that the stakeholder
account is the Government's preferred option?
Mr Lewis: As far as I know we
do not say that. We give access to parents to a number of providers
and it is really for the parents to make that decision.
1 Ev 13 Back
2
Ev 13 Back
3
Ev 13 Back
4
Treasury Committee, Second Report of Session 2003-04, Child
Trust Funds HC 86, Q382 Back
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