Select Committee on Treasury Minutes of Evidence

Letter from Mr Ivan Lewis MP, Economic Secretary, HM Treasury to Mr Michael Fallon, Chairman of the Treasury Sub-Committee

I am pleased that the Treasury Select Sub Committee is taking an interest in the Child Trust Fund (CTF), a groundbreaking policy at the heart of the Government's savings strategy. Following our very useful session on 30 November, I am writing on a number of points that you and your colleagues raised.

Sally Keeble (Q25) requested information about the surveys we are planning. We are carrying out on-going research (both qualitative and quantitative) to help us refine our communications strategy. We always make sure that low-income respondents are included in the samples and we specifically ask the research agencies to look out for any difference in the responses of those on low-income compared with higher income parents. We will also be carrying out qualitative research with parents of a variety of incomes to explore in-depth parents' attitudes towards and experiences of children's saving and investments, and we will investigate in detail parents' reactions to the CTF and their intended behaviour.

John McFall (Q29) asked about the possibility of the FSA producing comparative tables for the CTF. We have worked with the FSA to ensure that the CTF is supported by appropriate consumer protection rules and consumer information. Now that the scheme is up and running, we have asked the FSA to consider further the potential for comparative tables and the FSA have confirmed that they will look at this.

You (Q34) raised a question about whether we had thought about giving compensation to children whose parents did not open a CTF account for them. Children born before 6 April 2005 have received vouchers for slightly more than £250 to make up for any gains they might have earned in the period between birth and the launch of CTF. However, we have not built into the CTF any compensation or payment of any growth or interest on unused vouchers. This is because doing so may provide an incentive not to open an account and because there has been no action on behalf of the Government that has caused loss to the child. We understand the importance of parents opening a CTF account and a key Government message on the CTF has been to encourage parents to open an account as soon as they feel ready because the sooner they open an account the sooner their child's money will start to grow.

I can confirm what was said during our session in response to a question from Jim Cousins (Q70) that we do not currently have take-up data by region or country. However, we are committed to publishing a detailed analysis of the CTF, including regional information, in 2007 when we will have matched the CTF data with Child Benefit and Tax Credits data.

Peter Viggers (Q115) expressed some concern about the administrative costs involved if a child without a CTF account is identified at some later date. The likelihood of this is remote as our processes are designed to ensure that parents of all eligible children are automatically issued with a voucher when Child Benefit is awarded. HMRC will open an account if that voucher is not used. And there are special arrangements to ensure that looked after children do not miss out. Of course, there is always that small possibility that a child is missed for some reason. The tracing involved in such a circumstance would be very simple and the costs would be minimal.

I hope this is helpful and I look forward to our next session.

13 December 2005

previous page contents

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2006
Prepared 23 January 2006