Letter from Mr Ivan Lewis MP, Economic
Secretary, HM Treasury to Mr Michael Fallon, Chairman of the Treasury
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
13 December 2005