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Delegated Legislation Committee Debates

Draft Child Trust Funds (Amendment) Regulations 2010



The Committee consisted of the following Members:

Chairman: Mr. Bill Olner
Binley, Mr. Brian (Northampton, South) (Con)
Breed, Mr. Colin (South-East Cornwall) (LD)
Burgon, Colin (Elmet) (Lab)
Cable, Dr. Vincent (Twickenham) (LD)
Davidson, Mr. Ian (Glasgow, South-West) (Lab/Co-op)
Duddridge, James (Rochford and Southend, East) (Con)
Fallon, Mr. Michael (Sevenoaks) (Con)
Hoban, Mr. Mark (Fareham) (Con)
Hodgson, Mrs. Sharon (Gateshead, East and Washington, West) (Lab)
Liddell-Grainger, Mr. Ian (Bridgwater) (Con)
McCarthy-Fry, Sarah (Exchequer Secretary to the Treasury)
McDonagh, Siobhain (Mitcham and Morden) (Lab)
MacShane, Mr. Denis (Rotherham) (Lab)
Michael, Alun (Cardiff, South and Penarth) (Lab/Co-op)
Mudie, Mr. George (Leeds, East) (Lab)
Southworth, Helen (Warrington, South) (Lab)
Gosia McBride, Committee Clerk
† attended the Committee

Eighth Delegated Legislation Committee

Wednesday 10 February 2010

[Mr. Bill Olner in the Chair]

Draft Child Trust Funds (Amendment) Regulations 2010

2.30 pm
The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): I beg to move,
That the Committee has considered the draft Child Trust Funds (Amendment) Regulations 2010.
It is a pleasure to serve again under your chairmanship, Mr. Olner.
The draft regulations introduce new Government payments to the child trust fund accounts of all disabled and severely disabled eligible children. As members of the Committee know, a child trust fund is a long-term savings and investment account for children born after 1 September 2002. Children are eligible if they live in the UK, if child benefit has been awarded to them and if they are not subject to any immigration restrictions.
The child trust fund is an integral part of the Government’s savings strategy. It is an ambitious initiative that will ensure that every child, regardless of their background, has a financial asset at the age of 18. It promotes positive attitudes towards saving, and will strengthen the financial education of both children and adults by bringing financial education to life.
Parents are sent a child trust fund voucher automatically once they have been awarded child benefit, and they use the voucher to open the account of their choice. To date, three quarters of parents have opened accounts on behalf of their child. No eligible child misses out, because if parents do not use the voucher within 12 months, HMRC opens a stakeholder account with a financial provider on behalf of the child.
Eligible children receive a Government contribution of £250 into their child trust fund account when it is first opened, and again when they become seven years old. Children from lower-income families receive a further £250 initially and again at age seven. Special arrangements are also in place to ensure that children in care, who may not receive a child benefit award, do not miss out on an account.
The Child Trust Funds Act 2004 allows the Treasury to make regulations that provide for further Government payments to be made into the accounts of eligible children. For example, the regulations for contributions at age seven were made under those provisions. Recognising that children with disabilities may need extra support to make the most of their potential on entering adulthood, at Budget 2009, the Chancellor announced that the Government will contribute an additional £100 into the child trust funds of disabled children every year, with severely disabled children receiving a total of £200 each year.
Children who are entitled to disability living allowance at any point within a tax year will receive £100 into their child trust fund. Children who at any point in a tax year are entitled to the highest weekly rate of the care component of disability living allowance will receive £200 into their child trust fund. That is in line with the definition of severe disability used elsewhere in the tax system. The first of those new payments will be made directly into child trust fund accounts in April 2010 for children who are entitled to disability living allowance at any point in the 2009-10 tax year.
The Government’s intention is to make such payments to disabled children throughout the life of their child trust fund. This secondary legislation provides for payments until 2018, when the first eligible children will turn 16, because that is what is achievable under the current primary legislation. The Government intend to amend the child trust fund primary legislation, as soon as the parliamentary timetable allows before 2018, to enable payments to be made to the child trust fund accounts of all eligible disabled children, including those aged 16 and 17.
Payments will be made into the accounts of disabled children using the same system used for other such Government contributions, such as the payments at age seven. Child trust fund providers already know and use the system, and they will not have to make any changes to their IT infrastructure to cope with the new payments. The impact on business will therefore be minimal.
Her Majesty’s Revenue and Customs will extend existing data feeds from the Department for Work and Pensions to get information about which children are entitled to disability living allowance and thus to the new child trust fund payments. As with the other Government contributions into child trust funds, payments will be automatic and no claim will be required on behalf of the child. To ensure that no eligible child will miss out, officials from both Departments are working closely together to make sure that parents, legal guardians and carers are aware of their children’s entitlements.
To conclude, the Government recognise that children with disabilities often have greater financial needs on entering adulthood, and therefore need extra support to make the most of their potential. The regulations provide for the Government to make annual £100 contributions into the child trust funds of eligible disabled children, and £200 payments into the accounts of severely disabled children, starting this April. I commend the regulations to the Committee.
2.34 pm
Mr. Mark Hoban (Fareham) (Con): It is a pleasure to serve under your chairmanship once more, Mr. Olner. Although we in the Conservative party intend some reforms for child trust funds, we recognise that additional support is required for children with disabilities, and we have no objections to this statutory instrument.
2.35 pm
2.36 pm
Sarah McCarthy-Fry: All I need to say is that I thank both hon. Gentleman for their support, and I commend the regulations to the Committee.
Question put and agreed to.
2.36 pm
Committee rose.
 
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