Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 20-39)


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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