Draft Child Trust Funds (Amendment
No. 3) Regulations

The Committee consisted of the following Members:

Chair: † Mr David Crausby 

†Blunkett, Mr David (Sheffield, Brightside and Hillsborough) (Lab) 

Chapman, Mrs Jenny (Darlington) (Lab) 

†Glen, John (Salisbury) (Con) 

†Goldsmith, Zac (Richmond Park) (Con) 

†Goodwill, Mr Robert (Scarborough and Whitby) (Con) 

†Graham, Richard (Gloucester) (Con) 

†Griffiths, Andrew (Burton) (Con) 

†Gummer, Ben (Ipswich) (Con) 

†Hands, Greg (Chelsea and Fulham) (Con) 

†Hanson, Mr David (Delyn) (Lab) 

†Hoban, Mr Mark (Financial Secretary to the Treasury)  

†McCann, Mr Michael (East Kilbride, Strathaven and Lesmahagow) (Lab) 

†Mudie, Mr George (Leeds East) (Lab) 

†Paisley, Ian (North Antrim) (DUP) 

†Swales, Ian (Redcar) (LD) 

†Trickett, Jon (Hemsworth) (Lab) 

†Williams, Stephen (Bristol West) (LD) 

†Williamson, Chris (Derby North) (Lab) 

Ben Williams, Committee Clerk

† attended the Committee

Fifth Delegated Legislation Committee 

Tuesday 20 July 2010  

[Mr David Crausby in the Chair] 

Draft Child Trust Funds (Amendment No. 3) Regulations 2010 

4.30 pm 

The Financial Secretary to the Treasury (Mr Mark Hoban):  I beg to move, 

That the Committee has considered the draft Child Trust Funds (Amendment No. 3) Regulations 2010. 

It is a pleasure to serve under your chairmanship for, I think, the first time, Mr Crausby. As hon. Members will know, the Government announced in May that Government payments to child trust funds would reduce and then stop, to help to reduce the budget deficit. The regulations start to implement those changes by reducing a number of payments and stopping others. They will be followed by a Bill, which we shall bring before Parliament later this year, to stop the remaining Government payments. 

I realise that some parents will be disappointed by the changes, as will child trust fund providers. Many hon. Members here today will be disappointed, too. Of course, if we had unlimited resources, it would have been possible to continue Government payments into child trust funds, but that is far from being the situation. Instead, the Government have inherited the largest deficit in Britain’s peacetime history. Tackling that deficit is the greatest economic challenge that we face and our top priority. That will support the recovery, creating the conditions for businesses to grow and enabling interest rates to be kept lower for longer, but it requires us to take tough decisions, which is what we have had to do on child trust funds. It would have been simply unaffordable to continue to spend more than £500 million a year on them. We therefore believe that it is right to reduce and then stop Government payments. That will save £320 million this year, and more than £500 million in each year in the future. 

The regulations are the first step in achieving the savings. They will reduce starting payments, end age seven payments and end the additional payments into the child trust funds of disabled children, although we will be recycling the funding allocated for those payments. I shall talk about each of those measures in turn. 

The first is the reduction in starting payments, dealt with by regulation 3. At present, all children for whom child benefit is paid have £250 paid into their child trust fund account by the Government when the account is opened. Children in lower-income families later receive a further £250. The regulations will reduce both those payments to £50. That will affect all children for whom child benefit is first paid after 2 August, and therefore all children born after that date. However, children born before 2 August will be unaffected, as long as child benefit is paid for them by 2 August. I should explain

that the date is 2 August rather than 1 August because 2 August is a Monday and child benefit awards always start on a Monday. 

As child benefit payments can be backdated by up to three months, a claim will need to be made by 1 November in order for child benefit to be paid by 2 August and therefore for the child to be eligible for the current level of Government payments into their child trust fund. That gives parents a three-month window in which to make a claim. For example, if a child is born on 31 July and child benefit is claimed by 1 November, it will be backdated and paid from the Monday after the child’s birth, which will be 2 August. The child will therefore become eligible for a child trust fund on 2 August and will be eligible for the current level of payment. 

A similar three-month window will apply to children whose immigration control is lifted. That means that a child with a child benefit award who would be eligible for the current level of payment but for the fact that they are subject to immigration control will be eligible if their immigration control is lifted by 1 November. 

I want specifically to mention looked-after children, in the care of a local authority, as they are treated slightly differently. Those children are eligible for a child trust fund even if they are not in a child benefit claim, and they currently receive £500 when their account is opened. That payment will be reduced to £100 by the regulations. In both cases, that is the same total amount as for children in lower-income families. Again, children born before 2 August may be eligible for the current level of payment, and again we have allowed a three-month window for children to become eligible by that route. 

The regulations ensure, for example, that a child born on 31 July for whom no child benefit claim is made, and who is then taken into care at any time up to 1 November, will also be eligible for the existing higher payments. We want to ensure that children who qualify for receipt of the payments receive them, so we have added the three-month window. I accept that that adds complexity, but it also creates fairness. 

I come now to the other two payments affected by the regulations. Regulation 4 ends all Government payments at the age of seven—the £250 payment made to all children, the additional £250 given to children in lower-incomes families, and the total of £500 paid to children in care. Those payments will stop for all children turning seven from 1 August 2010. 

Regulation 5 ends the annual payments made into the child trust funds of disabled children. The payments due this year will be made, but they will stop from 2011-12. As we announced on 24 May, however, the money that would have been used to make those payments in future years will be recycled into additional respite breaks. 

As I said, these changes are the first step in the Government’s changes to the child trust funds. We intend to introduce primary legislation later this year to end eligibility for child trust funds for children born from January 2011 onwards. As I said at the start, I realise that the changes are disappointing, but they are necessary. 

I also realise that the changes will have a particular impact on many child trust fund providers, ending eligibility for child trust funds and reducing their value for children born between August and December this

year. Some providers are concerned about the profitability of offering accounts that start with £50, rather than £250, from the Government. 

Again, the change was necessary. If we had simply waited until January to stop all Government payments, rather than reducing them from August, we would have reduced our savings this year by £190 million, which is a significant sum. However, we are looking closely with providers at whether there are any changes that we can make to mitigate the effects of the proposals. 

We are also carefully considering the suggestion made by some providers and others that the child trust fund wrapper continue to be available to parents even once Government payments have ended. Saving levels have been too low in recent years, and we want to encourage people to save and invest, including for their children. I hope that Members will agree that it is right for us to take the time to think about the best way of doing that, and I will meet a number of stakeholders later this week to discuss the issue. 

Of course, any options for encouraging saving will need to fit with our top priority, which is to tackle Britain’s unprecedented deficit. Failing to do so would threaten higher interest rates for families and businesses, and would mean high levels of debt, which would burden future generations. As I said, the deficit has unfortunately made the child trust fund simply unaffordable. Stopping payments is therefore necessary, and having made that decision, it is right that we should look to maximise our savings this year by reducing the payments first. 

Stephen Williams (Bristol West) (LD):  Will my hon. Friend confirm that in addition to dealing with the deficit, one of the Government’s big priorities is to invest substantial amounts in children from disadvantaged backgrounds through the pupil premium? In fact, releasing money from the child trust fund will enable us to put £2.5 billion into the pupil premium. 

Mr Hoban:  Indeed. My right hon. Friend the Chancellor took a number of decisions in the Budget to redirect resources towards the most vulnerable and poorest families, and the measure before us identifies savings that can be used towards that end. We have to make difficult choices to make sure that we protect the most vulnerable while laying the foundations for our future economic recovery. 

Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab):  In view of the question that has just been put by the hon. Member for Bristol West, will the Minister tell us whether a calculation has been made of the reduction in funding to disadvantaged families as a whole as a result of the reduction of aggregate external funding to local government, including the area-based grant, and the withdrawal of additional educational funding, which will be redistributed into the pupil premium? How much loss will be incurred with regard to the future savings ratio because of the reduction in the number of families saving and making additional contributions? That figure had risen from 18% to 31% during the life of the child trust fund. 

Mr Hoban:  This is not a debate about local authority funding, and I am sure that you would not wish me to go down that route, Mr Crausby. However, on the issue of saving, the right hon. Member for Sheffield, Brightside

and Hillsborough should remember that under his Government, the savings ratio was negative in 2008. One in four families entered the recession with no savings at all, while half of families had savings of less than £1,500, so the previous Government’s record is less than perfect in this area. 

We as a coalition Government are committed to finding ways to encourage more people to save. That is why I announced last week our plans to launch an annual financial health check, which will help families assess their debt levels and how they can both provide for immediate savings needs and save more for retirement. We must ensure that good building-blocks are in place to help families save for the future. Better-quality financial advice is part of the solution to that problem. I hope that the right hon. Gentleman will welcome that announcement. 

Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab):  The coalition Government have made much play of the fact that they want to encourage more people to save. Does the Minister accept that child trust funds were one of the best possible ways to achieve that? Through an initial Government investment, they encouraged not just the immediate but the extended family to contribute to a child’s account for the rest of the child’s life, in order to create a great platform from which to move on and have a successful life. Does he not accept that by making the abolition of child trust funds a priority, this Government will damage saving? 

Mr Hoban:  I have two points to make in response. First, as I said earlier, we are working with some of the businesses involved to consider how we can continue to encourage saving for children. There is no barrier to putting money into an existing child trust fund, or to using one of the many savings vehicles available on behalf of a grandchild, niece or nephew, or any child. There are plenty of vehicles that can be used by people who want to save money for their children. We need to think of cost-effective ways to encourage more families to think about saving, not just for immediate needs but for long-term needs. 

We believe that stopping the payments is necessary. Having made that decision, it is right that we should maximise our savings this year by reducing the payments. That will reduce the need for spending cuts elsewhere, tax rises or borrowing, which would be required if we took a different approach. The regulations are the first step in implementing the changes to child trust funds. I believe that they are necessary and will make an important contribution to reducing the budget deficit, and I hope that Members will support them. 

4.42 pm 

Mr David Hanson (Delyn) (Lab):  It is a pleasure to serve under your chairmanship for the first time, Mr Crausby; it is a pleasure to be here today for many reasons. This is the first time for 13 years that I have spoken from the Opposition’s side of the Committee Room. I must say that it is not a very comfortable place to be, as today we have before us a fairly shoddy measure, which I warn the Minister we will oppose. 

In my view, the child trust fund has been a success of this Government— 

Mr Hoban:  The previous Government. 

Mr Hanson:  Indeed. Old habits die hard, as the Minister will know. The child trust fund is one of the successes of the previous Government. In my view, it was a success because it helped people to save, benefited the poorest in society, and created a framework under which those who hold such funds will have a dowry, to which the state and their families contributed, that gives them a financial basis for the future. 

It is disappointing that one of the first acts of the coalition Government has been to introduce the regulations, which will reduce the payments pending the scheme’s effective abolition in January next year. Perhaps that is because the Chancellor of the Exchequer and the Prime Minister do not need child trust funds, having trust funds of their own. From my perspective, however, child trust funds are important and have benefited many people in my constituency and elsewhere. 

More than 5.5 million children now have child trust fund accounts, a figure that will rise to 6.5 million by the end of the year. At the moment, 10 million adults have paid into those child trust funds since they were envisaged and enacted. That is a success. Many people who now contribute to child trust funds, putting in their hard-earned private money to supplement the money provided by the state, had never saved for their children before, or contributed in such a way, and would not have thought of so doing. They are now part of the savings culture that the Government propose to encourage through other measures. 

On active placements by parents, an average of 74% of parents open their child’s trust fund account on receiving the initial trust fund. Because of steps taken by the previous Government, 100% of children receive the fund thanks to the safety net. Therefore, the opportunity is not lost, even by those who, for whatever reason, do not contribute in that hectic first year. 

That figure of 74% of people contributing to the child trust fund compares with 40% of the adult population who have a private pension and an even lower figure of 30% of the adult population who have an individual savings account. So it is an important contribution, whereby the generation of that dowry has helped people to contribute to the child trust fund for the future. 

Richard Graham (Gloucester) (Con):  I am grateful to the hon. Gentleman for giving way. 

Mr Hanson:  The right hon. Gentleman. 

Richard Graham:  I am grateful to the right hon. Gentleman for giving way. When he looks at constituencies such as mine, which have high numbers of relatively poor people who are having these child trust funds reduced and then closed, does he not see that the previous Government bear the responsibility for having wasted so much money on unnecessary projects and bureaucracy and that, unfortunately, it is now some of the poorest people in this country who are having to pay for those mistakes? 

Mr Hanson:  I presume that the hon. Gentleman will go out tomorrow and issue a press release to the good people of Gloucester, saying to the 8,489 people there who have already received money from the child trust fund that they should give it back because he does not support the fund? Will he do that? 

Richard Graham:  With respect, I will ask the people of Gloucester to address my predecessor and the right hon. Gentleman’s Government, asking them to apologise for having misled people so severely over such a long period of time. 

Mr Hanson:  I am sorry, but I am sure that the 8,489 people in Gloucester who have already received the child trust fund welcomed it and have contributed to saving for that resource in the future. 

Stephen Williams:  I am sure that the right hon. Gentleman is absolutely right that people are grateful for free money from the state—who would not be grateful? However, he said that the fund has benefited millions of families up and down the country. Can he say which proportion of society has benefited the most from the fund? Is it the wealthiest proportion of society or the poorest? 

Mr Hanson:  To date, there are 6,742 families in the constituency of Bristol, West who have received the child trust fund and who would have welcomed that money. 

There is one option that I would very much welcome the Financial Secretary considering. If he intends to abolish the child trust fund—which he is—he could abolish it just for the richest people in society. That is one of the options, but he has not considered it. He is abolishing the fund right across the board, including for poorer people in society, for people with disabilities downstream and for others. He could have considered other options if he needed to save money, but he has chosen to abolish the whole scheme. That shows that the Conservative-Liberal coalition is not concerned about helping poorer people to reach maturity at 18 with a dowry to help them to face some of the challenges that they will face in their future. 

Stephen Williams:  I remind the right hon. Gentleman that one of the key terms in the coalition agreement is to introduce a pupil premium, which the money released by the abolition of the child trust fund will help to fund. The biggest barrier to people saving is their capacity to save; the biggest barrier to their capacity to save is their capacity to earn, and the biggest barrier to their capacity to earn is their education. The pupil premium will address that. 

Mr Hanson:  The hon. Gentleman comes back to the initial point, which is that families in the lowest income bracket are now saving a higher proportion of their household income thanks to the child trust fund than those from more affluent backgrounds. The fact that we have encouraged people who traditionally have not saved to save for their children’s future, including a contribution from the state to help them, has been a positive benefit. 

Mr Blunkett:  Does my right hon. Friend also accept that 50% of the total money allocated and invested by the Government on behalf of the community went to the 1.5 million lowest-income families, who have an income of £16,000 a year or less? 

Mr Hanson:  My right hon. Friend makes a very valuable point, which I will certainly follow up. 

Ben Gummer (Ipswich) (Con):  I really do understand the disappointment that the right hon. Gentleman and other hon. Members are experiencing at the passing of the child trust fund, especially the right hon. Member for Sheffield, Brightside and Hillsborough, who was a key proponent of the fund. I laud the aims behind the fund. Nevertheless, cannot the right hon. Gentleman lay the blame for the abolition of the fund not with this coalition Government but with the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who has bankrupted this nation singlehandedly? Many Opposition Members worked hard to get rid of him during his time in office and they know the full reason why they did so. It is really not us—the coalition Government—who should be blamed for this measure. 

The Chair:  Order. With respect, I ask right hon. and hon. Members to confine their comments to the measure before us. 

Mr Hanson:  The hon. Member for Ipswich raises the valid question of how we tackle the deficit, which has been caused by a range of issues. Those issues cannot all necessarily be laid at the door of this Government but they are of international concern. We went into the election with a deficit-reduction plan that looked at the long-term issues and at some other alternatives, which included increasing national insurance and making some savings. The fact is that the Financial Secretary and the Chancellor have chosen to cut the resources to those who are the poorest and most in need in society. 

Ben Gummer:  Is it not incumbent on the right hon. Gentleman to suggest what cuts he would propose to make elsewhere to be able to pay for the continuation of the child trust fund? We would be interested to hear that. 

Mr Hanson:  I would be happy to go down that route, Mr Crausby, but I suspect that you would not want me to do that today. I am happy to refer the hon. Gentleman to the Labour manifesto. [Interruption.] In my defence, I recognise that the public elected only 258 of us into this parliament. None the less, we had a deficit reduction plan as well as proposals to raise national insurance and proposals in other areas. In the previous Parliament I was the Minister responsible for policing and we had proposals to save money in that budget and in others. If the hon. Gentleman looks at those issues, he will see that we did have choices, and this was not one of them. 

Mr McCann:  There is a queue of people waiting to intervene. May I suggest that the Government have chosen to abolish the child trust fund because the previous Government had to bail out Conservative bankers to the tune of billions of pounds and, as a result of those Conservative bankers’ actions, revenues dropped in this country by 25%? 

The Chair:  Order. I know that emotions are bound to run high on this matter, but I respectfully ask hon. Members to confine their comments to the measure before us. 

Mr Hanson:  I will certainly try to keep within your strictures, Mr Crausby. 

The important point is that there will be a debate outside this Committee about the deficit reduction plans of both the current and the previous Governments. Both parties have made choices. The choice that the Government have made in this order is unfair. Moreover, it is not conducive to the long-term interests of the savings economy in our society. It will not help poorer people save for the future and it is not fair or equitable. 

Andrew Griffiths (Burton) (Con):  The right hon. Gentleman referred on a number of occasions to the previous Government’s debt-reduction policy. He will know very well that the International Monetary Fund, the OECD and the European Commission all expressed their concern about the inadequacy of the debt-reduction plan. Will he tell us who actually supported it? 

Mr Hanson:  I think that I am being dragged down avenues that you would rightly admonish me for going down, Mr Crausby. We can have the debate about the debt-reduction plan outside this Committee. Let us simply say that there is a difference of opinion between the coalition and the Labour party about how we deal with that debt-reduction plan. The outcome of today’s deliberations is that an unfair choice has been made by the Con-Dem Government, and it will hit the poorer people in our community the hardest. 

Before the child trust fund was in place, the average amount saved each month in what was then called the Children’s Mutual baby bond was around £15 a month. The average now saved in a child trust fund provided by the Children’s Mutual is £24 a month, which is an increase of 60%. The scheme has encouraged and increased the amount of saving in our community. Some 1.4 million parents, families and friends are contributing to child trust fund accounts this very month, with in excess of £22 million being added every month. I would have thought that the Government would have encouraged that saving, been grateful that that had happened and been happy that those initial contributions had made such a difference. 

Richard Graham:  If I understood the Financial Secretary correctly earlier, the trust funds will still be open for savings to be deposited by friends or family, and will grow in the usual way associated with the trust funds. The only thing being stopped is the sort of saving that Opposition Members are most keen on: the sort where the Government hand out money. I suggest to the right hon. Gentleman and his colleagues that the most effective form of savings are not simply provided by the Government; the Government should rather provide the framework within which, and the background against which, people can generate savings. That will still apply to the trust funds. 

Mr Hanson:  With due respect to the hon. Gentleman, that is precisely the benefit and the point of the child trust fund. I would be interested to hear the Minister confirm that he will keep the infrastructure post-January, so that individuals can contribute privately to the trust funds if they wish, because the cost of that might be between £2 million and £4.5 million a year. Will the infrastructure be maintained, so that children can contribute to it, at least with their parents? 

The hon. Member for Gloucester misses the point of the child trust funds, which is to show that the state is investing in that individual and, in doing so, is encouraging the parent to invest in that individual. The very fact that a £250 contribution—for the poorest families it was £500—was made seemed, for many people who had not saved before, to create an element of partnership between the state and the family. That contribution was meant to help children meet the challenges of their future life when they matriculated at the age of 18. That was the whole point of the trust fund. 

Richard Graham:  Will the right hon. Gentleman give way? 

Mr Hanson:  I would like to make some progress, if I may. 

Richard Graham:  Will the right hon. Gentleman give way? 

The Chair:  The right hon. Gentleman is clearly not giving way. 

Mr Hanson:  I would like to make some progress, because many other hon. Members want to contribute, and this is a very short debate with a maximum duration of an hour and a half. The value of the trust funds has been shown clearly by the number of parents and family members who have contributed to them. We have in excess of £2 billion of funds under the management of child trust fund accounts. 

Mr Hoban:  Will the right hon. Gentleman give way? 

Mr Hanson:  For the hon. Gentleman I will certainly give way. 

Mr Hoban:  Will the right hon. Gentleman tell the Committee what proportion of families on a low income contribute to child trust funds? 

Mr Hanson:  I certainly can. I will happily share the figures with the hon. Gentleman; I shall refer to them in a moment. The proportion is certainly higher than it was. The figures that I have show that more people now contribute. Prior to the child trust fund, only 18% of children had regular long-term savings. That figure has now risen to 50%. Within that figure, there is an increase in the number of poorer people involved. 

Mr Hoban  rose—  

Mr Hanson:  I am sure that the hon. Gentleman has a briefing from the Treasury. 

Mr Hoban:  May I put the right hon. Gentleman out of his misery and say that only 13% of families with children on a low income contribute to the child trust fund? 

Mr Hanson:  If that is the case— 

Richard Graham:  Will the right hon. Gentleman give way? 

Mr Hanson:  I must put the hon. Member for Gloucester out of his misery, because he seems to be bobbing up all the time. Let him say his piece. 

Richard Graham:  The right hon. Gentleman said that 6,500 people in my constituency would be very disappointed about the child trust funds, so it is relevant that he has heard from my hon. Friend the Minister the precise low figure relating to the number of low-income families who contribute to these savings funds, of which he is so proud. If they were the success that he intimated they were, surely people would have made considerably larger and more frequent contributions to the savings plan. 

Mr Hanson:  My answer is twofold. First, if that figure is correct—I have no reason to disbelieve it—13% of people are contributing. Before the scheme, that figure was zero. Secondly, the very point that the Minister makes shows that he could have made other choices. He could have said, “Let’s put a cap on the income that people who qualify for a child trust fund can have.” He chose not to do that; he chose to abolish the whole scheme, including for the 13% of people he has mentioned. 

Jon Trickett (Hemsworth) (Lab):  May I draw my right hon. Friend’s attention to the comments of one of the leading providers of CTFs, the Children’s Mutual? It said: 

“The CTF is the most successful financial initiative we’ve ever had in this country”. 

The spokesperson for that organisation talks about the well-off and goes on to state that 30%—not 13 %— 

“of households with an income of £19,000 or under typically save an additional £19 a month for their child via CTFs.” 

Those are the figures from the industry itself. 

Mr Hanson:  I am grateful to my hon. Friend for those figures. They add to the argument that the child trust fund is a generator of savings for people from the community at large. 

Andrew Griffiths:  The right hon. Gentleman rightly points to the number of families who are saving through the child trust fund, and everyone in the House wants to encourage an increase in saving. However, does he recognise that as well as the racking-up of almost £1 trillion of national debt, since 1997 there has been a huge increase in personal debt, peaking in 2008? That is a result of the previous Government’s fiscal policies. 

Mr Hanson:  We have been round those houses a lot, and we disagree on that; that is the nature of our political life. There is an established need for the child trust fund. The amount that people pay for their child between the ages of 18 and 21 is estimated to be around £13,500 a year. The average debt owed by an 18-year-old is £5,100; that rises to £8,000 for 25-year-olds. The cost of a university degree is currently around £10,000 a year. Those figures will undoubtedly grow. Whatever

Government hold the reins over the next 18 years, changes will be made to expand educational opportunity, and that will involve parental and other contributions. That is necessary, and the purpose of the child trust fund was to give children a base for the future. 

The Financial Secretary will know that as recently as February this year we debated, probably in this very Committee Room, an extension of the scheme to children with disabilities, and we included measures that he is removing today. Mr Crausby, will you please ensure that we check the microphones in this room today? Hansard does a fantastic job, but I would like today’s record to be carefully checked. When I look back to February, when those measure were included, I see that it was not opposed by the Liberal Democrats or the Conservatives. The Financial Secretary said: 

“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.” 

I presume that the microphones picked that up badly, or that there was a fuzzy noise in the Committee Room, because the Financial Secretary has turned that comment on its head since then. The then Member for South East Cornwall, Mr Colin Breed—a Liberal Democrat—said: 

“it is clear that disabled children have a greater need than the ordinary child. Therefore if there is an opportunity to address that, I have no doubt that it is a good thing…I have no objection to this statutory instrument, although at some stage there will have be a wider ranging review of the value of expenditure on trust funds. On that basis, I am happy to support the regulations.”—[Official Report, Eighth Delegated Legislation Committee, 10 February 20108; c. 4.] 

Hon. Members said one thing before the election, and another after. The Financial Secretary is standing on his head, as are the Liberal Democrats, because they are removing child trust funds but were too scared to tell the truth before the election. 

Stephen Williams:  May I put the right hon. Gentleman right? I was involved in Liberal Democrat education policy for virtually all the previous Parliament. I wrote the manifesto for the 2010 general election and was a candidate at the 2005 general election. We said in both those manifestos that we would abolish the child trust fund. We have been completely consistent for more than five years. The right hon. Gentleman seems to be referring to a statutory instrument on disability, not the child trust fund generally. 

Mr Hanson:  The hon. Gentleman should know that the then Member for South East Cornwall was commenting on a statutory instrument that in February provided an extension of the child trust fund to disabled children, which he did not oppose. The Financial Secretary did not oppose it, but today he has changed his mind. I am sure that we will return to the economic debate on such issues, but the fact is that the Conservative party and the Liberal Democrats have both turned the issue on its head. 

Ian Swales (Redcar) (LD):  The right hon. Gentleman should read again what the then Liberal Democrat Member said. He said something about the need for a wide-ranging review of trust funds. As my hon. Friend

the Member for Bristol West said, it has been in our manifesto for two elections running that we will abolish child trust funds. 

Mr Hanson:  The hon. Member for Redcar will presumably go back to Redcar and say that whatever the Liberal Democrats said in February in support of an issue does not count in July when the matter comes before us. [ Interruption. ] The hon. Gentleman won his seat in a democratic election—I am not challenging his authority to say what he says. But he can still be wrong. 

In February, in a Committee Room just like this, Colin Breed, previously the Liberal Democrat Member for South East Cornwall, supported what was before the Committee on that day. Today, the hon. Members for Redcar and for Bristol West will vote against the proposal. On that day in February, the hon. Member for Fareham, now the Financial Secretary to the Treasury, had no objections to the statutory instrument, but today he will turn, stand on his head and vote against what he supported in February. We need a wider exposition of that position in due course. 

The reason why all that is important is that, in the future, many thousands of children will not benefit from the child trust fund—poorer children who would have had the higher premium, richer children’s parents who would have had the lower premium, disabled children who would have had help and support and, perhaps worst of all, looked-after children who do not have parents. Looked-after children are in care and child trust funds provided them with an element of support, so that when they left care at 18 they had some dowry in their pockets. 

Whatever else, choices have been made. The Financial Secretary could have come to the Committee with a statutory instrument stopping the child trust fund for the richest but keeping it for the poorest, or even stopping it for disabled children, if that was his view. However, he has chosen to stop the child trust fund payments for looked-after, disabled, richer and poorer children across the board—he has made that choice to save the resources. He could have amended the scheme or salamied it in any way, shape or form he wished, but he has chosen not to do anything. Looked-after children who are now in care, do not have parents and currently qualify for help and financial support will now face not having that dowry at the age of 18. That, in particular, is shameful. 

The Minister does not have to listen to me, because I am a bigoted, biased old Labour politician, and I am expected to argue such cases on behalf of the people that we represent. However, he might want to listen to others: Phillip Blond, the director of ResPublica; Alison Garnham, the chief executive of the Daycare Trust; Lisa Harker, the director of the Institute for Public Policy Research; Professor Julian Le Grand; the chief executive of the YWCA; Belinda Phipps of the National Childbirth Trust; Katherine Rake of the Family and Parenting Institute; John Reeve of the Family Investments organisation— 

Mr Hoban:  David White of the Children’s Mutual? 

Mr Hanson  —or David White, the chief executive of the Children’s Mutual. Those individuals have written not just saying that they object to the draft regulations

but also wanting assurances, which I hope that the Financial Secretary will give at the end of the debate, about the future of the scheme. 

Even if the Financial Secretary chooses not to put Government resources into the child trust funds now, at least the infrastructure is there, for a cost of around £4.5 million per year maximum. If a future Government wished to reinstate those payments, they could do so, if the economy picked up or if the hon. Gentleman chose to put money in for looked-after, disabled or poorer children—even he might do that. Today is the opportunity for those assurances, before we face total abolition under primary legislation, probably in the early part of next year. 

Her Majesty’s Revenue and Customs issued a total of 823,504 children’s trust vouchers last year—70,000 per month—and of that more than 500,000 were opened directly by parents; a further 211,000 were opened by HMRC when vouchers had expired. There is a real hunger for the scheme, which has generated help and support for the poorest in society. I look forward to the Financial Secretary telling the Committee not just why he has made the choice to abolish the trust fund as a whole but why he has made that choice for looked-after children. Why has he chosen to turn on his head about disabled children? Why has he made the choice not to allow even the poorest 13% to benefit? The reason is that the measure is ideologically driven by the Conservatives and their Liberal Democrat friends. I urge my hon. and right hon. Friends to oppose the measure. 

I hope that the Financial Secretary will reflect on what has been said. He still has the opportunity for change in the run-up to the Bill in January. He would have my support and that of my hon. and right hon. Friends if he made changes to ensure help and support for people who do not have the ability to fund their futures after the age of 18 because of the circumstances of their birth. In my view, one of the fundamentals that we should be considering is how society helps to support those individuals. I shall certainly oppose the order. 

5.9 pm 

Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab):  It was said earlier that I had campaigned vigorously for the development of the child trust fund. I was indeed responsible for initiating research by the Department of Education and Employment between 1997 and 2001, and encouraging my right hon. Friend the former Prime Minister to take up the cause of the child trust fund when he was Chancellor of the Exchequer. I did so for three reasons. 

First, the country’s greatest long-term challenge is the asset divide, which is growing by the day. In London and the south-eastern part of the country, the assets held by domestic owners include the value of houses that are, for many, passed on from grandparents, parents, uncles and aunts, which is equivalent to wining the lottery. In many other parts of the country, there is greater take-up of rented accommodation, so ownership values are much lower, and the asset values passed on are lower. It will be a matter of regret in years to come that the divide is still growing, because it affects not

only the individual’s financial well-being but, as research has unequivocally proved, the individual’s contribution to society. 

Secondly, people who have an asset and, therefore, a stake in society, contribute more not only to society and to their own financial well-being but to reciprocity and mutuality—including people being more interested in education and fostering their children’s interest in it and in voting and participation in what is now being called the big society. There is a major spin-off, and there will be a major reversal from that spin-off if we cut the contribution to future asset accumulation. 

Thirdly, we all agree that there is a savings gap; the ratio in 2008 may have been neutral. Many, on all sides of politics, thought that we needed to do something to encourage savings. Nothing could be more radical than ensuring that every child had a savings fund from the moment they were born, so that they could inherit a trust fund at the age of 18, up to an average of £10,000, and could take it forward into their adult lives. 

I have a threefold criticism of what we did. First, we did not campaign hard enough to explain what we were doing and why. Secondly, we did not put enough into the trust funds to demonstrate the change in capital asset that would be held until the child reached adulthood at the age of 18. Thirdly, although I argued vehemently with the Treasury that funds should be ring-fenced, they would have none of it. I believed that they should have been ring-fenced so that they could be used only in the initial stages of adulthood for particular long-term gains, such as making a contribution towards starting a home, paying university fees or setting up in self-employment or similar work. 

Incidentally, those who think that that was the nanny state ought to have seen what happened to my mother when my father was killed in a works accident; in exchange for a small contribution, she had to go to court to be able to draw down on that money, and so did I until the age of 21. There are clear precedents, but we live in an era of libertarianism and ring-fencing the money was thought to be a restriction. I believe that the population would have warmed to the idea much more strongly if people had understood that. 

Some things were built into the demise of the scheme, but we could not see the total contradiction of a coalition Government. The Conservative party went into the election saying that it would retain the child trust fund because it encouraged saving. I shall not go into the figures, because I am talking either to the converted on the Opposition Benches or the unconverted on the Government Benches. In a sense, we are wasting our breath, but it is still worth putting our view on the record. The figures were spelled out by my right hon. Friend the Member for Delyn. I shall not repeat them, but many trust fund accounts have been opened, and contributions are being made to them from the family purse and from friends; that could have been encouraged, and Church and other mutual giving was something that we could have encouraged in time. I would have built on that. The Thoresen committee produced a report on money guidance and encouraging people to open bank accounts, which I hope the coalition Government will take forward. 

Child trust funds ensured not only that children had savings by the age of 18, but that their families had engaged with that saving, which was probably the biggest

step. Many families opted to contribute directly to opening their child trust fund—more than 85% in one form or another—and for many of them it was the first time they had taken that positive step, and they did so for their children’s future. By doing away with that, we have engaged in short-termism and undermined the reduction in capital divide, the savings motivation that was built into it and the chance for 18-year-olds to have an asset that they could use positively. 

Mr Hanson:  One point that I forgot to mention, and that might be of interest, is that the Welsh Assembly Government have taken the policy decision to top up the child trust fund by £50 for every child. I declare an interest, as my seven-year-old has received that top-up fund. Does my right hon. Friend agree that when the Minister responds, he should indicate whether any consultations have been undertaken with the Welsh Assembly Government or with providers? 

Mr Blunkett:  We should ask the Minister to indicate clearly whether the devolved Governments will be permitted to continue not only with the existing funds, but to open new ones, contribute to them, albeit modestly, and help the asset divide in Scotland, Wales and Northern Ireland to become a lot less than it will be in England in years to come. 

I will comment quickly on the contradictions. To be fair to the Conservatives, they did say that they would revise the child trust fund and contribute to the less well-off, but not to the better-off. Although I was unhappy with that, I believed them and thought that at least those who do not have the capacity to save as many of us in this Room do will have that encouragement and support. They will have the kind of encouragement and support that people have when opening ISAs. We should consider the £27 billion we spend on subsidising pension pots in this country, compared with the £500 million a year that it was costing us to help open and contribute to the child trust fund. 

Now that the Conservatives are in the coalition, however, they have decided that they will do away with child trust funds altogether, because the Liberal Democrat policy was to do away with them. That might interest the hon. Member for Redcar, whom I welcome to the House—I regret his victory, not at a personal level, but because I respected his predecessor greatly. I did not understand why the right hon. Member for Sheffield, Hallam (Mr Clegg) led the Liberal Democrats to adopt that short-term policy—although they were not enthusiastic about long-term policies generally, including Sure Start. They seem to have an aversion to anything that would change the nature of our society or improve equality in the long term—anything for a short-term gain. The hon. Member for Redcar is right that the Liberal Democrats said that they would do away with the child trust funds, but they did not say that they would put the money into a pupil premium. 

Stephen Williams:  Yes we did. 

Mr Blunkett:  No, they did not. I promise you, Mr Crausby, that they said that they would reduce infant class sizes with the money saved from the child trust funds. 

Stephen Williams:  As one of the members of the Liberal Democrat shadow Cabinet who voted on our education policies in the last Parliament, I can assure the right hon. Gentleman that we specifically said that we would abolish the child trust fund to divert the funds into education spending, specifically through the pupil premium. Reducing class sizes is one example of how schools could use the pupil premiums that they would get, and there are many other examples. 

Mr Blunkett:  I could believe that, particularly if it was a Liberal Democrat policy, where anything can change overnight. I was responsible for the first-ever cap on infant class sizes, and for the investment that made that possible in 1997, 1998 and 1999, so I assure Members that it was the capital cost that was required to reduce class sizes. Perversely, that was mainly in the leafy suburbs, in order to extend the physical environment to make class sizes of 30 or fewer a viable proposition. It may well have been in someone’s mind that the pupil premium might affect class sizes, but I understood that it was supposed to be diverted to children from disadvantaged backgrounds. 

The Chair:  Order. This is interesting, but could I ask the right hon. Gentleman to drift back to child trust funds? 

Richard Graham:  Will the right hon. Gentleman give way? 

Mr Blunkett:  I will give way, but I hope that the intervention is on the topic that we are discussing. 

Richard Graham:  As the right hon. Gentleman’s stated intent in introducing the child trust fund was to reduce the gap between rich and poor, and to increase equality, would he not agree that it is extraordinary that after 13 years of Labour Government, the inequalities, and the gap between rich and poor, have grown to, I believe, the highest level since 1961? 

Mr Blunkett:  The gap between the mean of income distribution and the lowest quartile actually narrowed. The gap between the top and the bottom did not narrow because we live in a global economy, which I understood the coalition was in favour of, and did not want to engage in capping the income of the very richest on the grounds that they would simply move abroad, as many of them do, in any case, to avoid even minimal taxation. That is one of the reasons we got in a pickle with the banks, along with people believing that they could get something for nothing. 

Richard Graham:  Will the right hon. Gentleman give way? 

Mr Blunkett:  I will give way, but, as you rightly pointed out to me a moment ago, Mr Crausby—I accepted your stricture—we are moving off the point. 

Richard Graham:  That was a remarkable statement from a party that had a Secretary of State who said that he was absolutely happy for people to get filthy rich. 

Mr Blunkett:  I remember my noble Friend saying that, and he has been working on it recently, but who am I to criticise? 

Jon Trickett:  I was fascinated to hear my right hon. Friend finish that sentence. On behalf of everyone I represent who has benefited from the child trust fund, I thank him for his work in conceptualising it. However, was not the point of the fund to address the capital gap, rather than the income gap? When a young adult gets to 18, they often face capital requirements such as the acquisition of a house or an education. Many people are excluded from that simply because their family has not saved and there is no capital. Was the fund not intended to address that, rather than the income gap to which the hon. Member for Gloucester referred? 

Mr Blunkett:  My hon. Friend is right—that was exactly what we intended to do. It was a long-term policy, but one does not get votes on long-term policies, as we found on 6 May. One gets votes on short-termism, and we lost. 

We will accept the regulations at our peril. The better-off, including me, have been able to help our adult children when they reached 18 in a way that many of our constituents are unable to, because they just do not have the funds. I was proud to be part of a Government who attempted to address that so that, in the long term, people would be more self-reliant and self-assured, and would have the ability to determine their own future and not be dependent on the state or others around them for long-term welfare benefits. 

John Glen (Salisbury) (Con):  The right hon. Gentleman projects an other-world reality, where he has a small amount of money with which to solve the problems of the world’s poorest. Does he not accept that the reality for many of the poorest is that they reach 18 with the prospect of going to university to rack up ridiculous debts, and little prospect of finding sustainable employment if the macro-economic situation is not improved? It is little solace to them to have a few hundred pounds in their hand when they have no prospect of doing anything with it. 

Mr Blunkett:  It would be considerable solace to know that their fees would be alleviated if they were on lower incomes, which is what I introduced in 1998, and that they had several thousand pounds to invest. They could make a choice to take out an advantageous loan on incredibly good terms and to invest judiciously the £9,700, on average, that they would have received to help pay it off. They would be a great deal better off than if they did not have the money at all. 

The nub of the issue is that young people would have had a start in life. They would have had the kind of benefits that the better off have, and, by definition—I come back to this point—they would have been more self-reliant. We would have tried to reduce the asset gap, but we would also have given people a sense of their own worth and a sense of self-reliance and identity. In the end, we will, as a nation, regret that we put too much emphasis on bailing people out of disadvantage, rather than enabling them to help themselves out of it. In other words, we should give people a hand up rather than a hand-out. 

5.26 pm 

Chris Williamson (Derby North) (Lab):  I congratulate my right hon. Friends, who have made a cogent and well-argued case for the introduction of the child trust fund and for its continuation. It is regrettable that we are considering its abolition. 

Having listened to Ministers today and in debates in the House, the more I listen to the Con-Dem coalition, the more I fear that they are writing a sequel to George Orwell’s “1984”, because the amount of doublespeak that we are hearing is unbelievable. The Minister says that the Con-Dem coalition favours encouraging people to save, yet he is abolishing one of the most significant instruments that is designed to so and has successfully helped people to save. That is beyond belief. 

The Minister opened his remarks by saying that he was sure that Opposition Members would be disappointed—as indeed will the wider general public—but that is an understatement. We are more outraged than disappointed by the proposal. Trying to dress the proposal up and say that it is part and parcel of the deficit-reduction plan will not wash, because from where I am sitting it seems that the Con-Dem coalition is, as I have said before, indulging in an economic vicious circle. 

As we saw in the past—in the 1930s, 80s and 90s—the cuts that the Government are implementing will result in job losses, which will result in benefit payments increasing and income tax receipts going down, which will in turn put more pressure on the Government to introduce more cuts, which will, again, result in more job losses, more unemployment benefit being paid, a further reduction in taxation income and more cuts. So the vicious circle goes on. That was why we were so intent on the need for the fiscal stimulus and the investment in the economy to get us through this recession. 

Stephen Williams:  The debate on the Finance Bill took place in the main Chamber, not in this Committee. 

Chris Williamson:  I am responding to the Minister’s comments on the deficit-reduction plan. The Minister himself said that this proposal was part and parcel of that plan, so I think that it is in order for me to respond to that point. 

Richard Graham:  Mr Crausby, will you confirm for Government Committee members what link there is between unemployment and the abolition of child trust funds? 

The Chair:  It is not for me to confirm anything. I am chairing this meeting. [Interruption.] At least, I think I am. 

Chris Williamson:  That is one of the most irrelevant interventions that we have heard this afternoon. 

The child trust fund is good value for money. It costs far less than tax breaks for people investing in pension plans, which are particularly for the better-off in society, and far less than tax breaks for ISAs. Furthermore, the take-up of the child trust fund is far higher than for either of those two things. According to research done by the Child Poverty Action Group, 40% of the population are contributing to a pension plan and 29% have an

ISA, but 75% of all children in this country are benefiting from the child trust fund. Why would the Government want to scrap something that is so plainly successful, unless—as my right hon. Friends the Members for Delyn and for Sheffield, Brightside and Hillsborough have already said— it was down to ideology, which is the driving force behind this decision? 

There has been some criticism from Government Committee members about the child trust fund, all of which is unjustified. As a direct consequence of the introduction of child trust funds, there has been a threefold increase in the number of people saving for their children. Not only that, but the amount being saved by families has increased by 60%. On either of those counts, the measure can be considered extremely successful. My right hon. Friend the Member for Delyn has referred to David White, the chief executive of The Children’s Mutual, but it is worth repeating the point. David White said that this is 

“the most successful savings initiative ever”— 

not just one of the most successful initiatives, or a very successful one, but the most one successful ever. That is a pretty good tribute to the child trust funds, and another reason why it is a travesty that we are considering scrapping them. The most important point however, which we have touched on slightly, is the saving patterns of people on low incomes. There has been a sea change in saving by low-income families. To somehow pooh-pooh the fact that, as the Minister said, only 30% of families on low incomes— 

Hon. Members:  Thirteen. 

Chris Williamson:  Did he say 13%? The figure is actually 30%. 

Richard Graham:  Mr Crausby, may I ask for clarification? Did the hon. Gentleman claim that the child trust funds initiative, which I believe has some £2 billion under management, 13% of which are savings generated by the families or their friends and the remaining 87% simply given by the Government, has been described as the “most successful savings instrument of all time”? That is the most extraordinary statement. It is completely inaccurate. 

Chris Williamson:  I suggest that the hon. Gentleman take the matter up with David White, the chief executive of The Children’s Mutual. I did not say that, he did. I would have thought that he was an expert on the matter, and somebody whose opinion the hon. Gentleman—[ Interruption. ]  

The Chair:  Order. It would make life a little easier if we spoke one at a time. 

Chris Williamson:  The hon. Gentleman and other Opposition Members would do well to treat David White’s opinions with a little more respect that they seem to be doing. 

Andrew Griffiths:  The hon. Gentleman gives a lot of credence to David White’s comments. How much money has David White’s company made out of the initiative? 

Chris Williamson:  My right hon. Friend the Member for Delyn referred to a whole list of other people in eminent positions who have endorsed the child trust fund initiative and said how successful it has been. We cannot argue with the facts. The facts show that 30% of low-income families are now saving—a huge increase. Young people, particularly those from low-income backgrounds but those from modest-income backgrounds also, will have benefited considerably when they get to the age of 18, as a direct consequence of the child trust funds. The funds are particularly beneficial to children from low-income families who would otherwise have had no dowry at 18, no nest egg to help them get into university. People from working-class backgrounds are often deterred from going to university because of the cost—tuition fees and the rest. 

Some 57% of our young people still do not go to university, and child trust funds would be extremely beneficial to them, perhaps contributing to the cost of driving lessons to help them get into the world of work, or as part of a deposit on a house, as my right hon. Friend the Member for Sheffield, Brightside and Hillsborough suggested. Low-income, working-class families in particular will be denied those opportunities if the funds are scrapped. 

Ian Swales:  Does the hon. Gentleman agree that child trust funds are a scattergun policy? I am sure that the Prime Minister is delighted that his family are about to receive one. If we really want to help people at 18, as the right hon. Member for Sheffield, Brightside and Hillsborough said, what will we say to those people who reach the age of 18 over the next 13 years and do not have child trust funds? Why has the Labour party gone against its manifesto commitments on tuition fees, which are one of the measures that have most impacted on people’s ability to move forward at 18? 

Chris Williamson:  I support the principle, wherever possible, of universality. If the hon. Gentleman does not like the scattergun approach, why is the Con-Dem coalition introducing what is effectively another version of a scattergun approach, because they are scrapping it for everybody? If they disagree with such an approach, as my right hon. Friend the Member for Delyn has said, why did they not say that they are scrapping it for the richest in society? Why did they not target and protect the most vulnerable and poorest people in our society, who would benefit most from this initiative? I can see that the hon. Gentleman is nodding from a sedentary position. Does he agree with that point? 

Ian Swales:  The link between cancelling the child trust fund and the pupil premium—providing money for disadvantaged children now and not in 18 years’ time—is what we believe in. 

Chris Williamson:  My right hon. Friend the Member for Sheffield, Brightside and Hillsborough made the point that the coalition Government prefer to indulge in short-termism rather than long-term strategy. A long-term strategy would have benefited considerably more people than their policies are proposing to do. 

I want to conclude because I think other members of the Committee want to speak. However, I must make reference to the fact that before the general election, all the major political parties were approached by the

Child Poverty Action Group about signing up to the fairness impact study. All parties signed up to it—in principle, at least. The Liberal Democrat leader gave an unqualified thumbs-up to the fairness impact study. He was absolutely on board with it and wished to implement it. For members of the Committee who may not be familiar with that study, it would subject all new policies of whichever Government came to power to a test for its impact on inequality. It is patently clear that the abolition of the child trust funds fails that test, and therefore the leaders of the Con-Dem coalition parties have gone back on a clear commitment that was given before the election to subject their new policies to the fairness impact study. 

Finally, my hon. Friends have made clear more eloquently than I can what a difference the child trust fund has made. The rationale for introducing it was extremely sound. The proposal to scrap the fund is mean-spirited, thoughtless and incredibly short-sighted. 

5.38 pm 

Mr McCann:  When I was offered the opportunity to sit on the Committee, I was looking forward, for the first time as a new Member, to making a contribution to the country in which I live. I was disappointed that at my first opportunity to make a contribution, an important measure that affects many people in my constituency and across the country was taken away. 

Listening to Government Members has confused me. The Minister referred to the removal of child trust funds as an austerity measure, while his Back-Bench colleagues talked about value for money. There is a massive contradiction on the Government Benches in what they are removing the funds for. The funds have been an overwhelming success, and I have looked at the statistics in my constituency that demonstrate that. I have an even closer parallel to make in terms of how they have been a success. My family is unique because my parents had five children, and I was the second eldest. My last three siblings were all born profoundly deaf. My younger brother has five children, who were all born profoundly deaf. My mother and father fought and campaigned hard for those children with a disability. I recognise that it is a Cinderella disability because at first sight one does not know that a person is deaf. However, the child trust fund makes a difference. I watched my brothers and sisters growing up with a disability. When they reached the ages of 16, 17 and 18 and were deciding what they wanted to do with their lives, they faced far more restrictions than an able-bodied person would have faced. They had far less opportunities to make their mark in life. 

I see the child trust fund making a difference, not only for families on low incomes, children who suffer from disabilities and looked-after children, but because of the additional endowment that the previous Government gave to children with disabilities. Although my brother is fortunate in that child trust funds have been set up for the five children who were born profoundly deaf, we know that in the future those payments will be stopped and the endowment that those children could have secured once they reached adulthood will no longer be there. 

There is a contradiction as to whether this cut is an austerity measure and whether the child trust funds provide good value for money, and the coalition must also look at what it wants to achieve. I thought that the concept behind the Conservative mantra was that saving is good and people should be encouraged to save. Surely, if we start from a base of zero, the type of returns that the child trust funds have secured are outstanding. We can argue about the percentages, but whether the figure is 10%, 20%, 30% or 40%, that is still 100%, 200%, 300% or 400% better than what existed before, which was nothing. This is about choices. 

Stephen Williams:  The hon. Gentleman is speaking with emotion about his family circumstances. During the last Parliament, I worked closely with the National Deaf Children’s Society and many other societies that promote the interests of children with special educational needs. The pupil premium and the Liberal Democrat policies are specifically designed to bridge the gaps in attainment suffered by children who come from disadvantaged backgrounds, whether that disadvantage is due to income or some other obstacle to attainment in schools. Through no fault of their own, the level of attainment of deaf children in gaining five good GCSEs is among the lowest in the country. The pupil premium is specifically designed to bridge those gaps, and the money will be released to help pay for that pupil premium. 

Mr McCann:  Mr Crausby, I shall defer to your opinion on what should be debated in the Committee, but as you have probably gathered from this rough Jock accent, I am not from England. It might interest the hon. Member for Bristol West to know that the pupil premium will not be available in Scotland, Wales or Northern Ireland. 

Mr George Mudie (Leeds East) (Lab):  Does my hon. Friend agree that the distressing point about this debate is that while I fully support the moves made to improve the chances of disadvantaged pupils in primary schools, I do not support the principle that the money to pay for that must come from disadvantaged children? This measure will save £200 million, yet last night we put through a Budget estimate figure of £555 billion without discussion after 10 o’clock. Does my hon. Friend think it outrageous that faced with a Budget of that amount, we could not find £200 million to contribute to primary school work without taking it from elsewhere? I concede—as would my hon. Friend—that it might have been better to have introduced a level below which the measure applied. I would concede ground there and therefore we would be in agreement. However, I find it outrageous that we are unnecessarily raiding the child trust fund to pay for work with disadvantaged children in schools. 

Mr McCann:  My hon. Friend will not be surprised to know that I agree with him entirely. I do not believe that the child trust fund and the pupil premium should be mutually exclusive. The hon. Member for Bristol West must take that point on board and understand that the National Deaf Children’s Society and—speaking from experience—deaf families, do not support the measure that he proposes. In the context of choice, we must bear in mind that it would have been possible to put restrictions in place for the child trust fund, rather than abolishing it in its entirety or—as we are doing at the moment—salami slicing it until we get to the abolition stage early in the new year. 

Mr Blunkett:  On the costings of the child trust fund, the amount withdrawn in this year alone from area-based grant applied to education in England exceeds the amount being saved on the child trust fund. It amounts to a £3.5 million cut this year for the most disadvantaged pupils in Sheffield, which is run by the Liberal Democrats. 

Mr McCann:  My right hon. Friend makes an apposite point. It all comes back to the question of choice. I believe that the options available to the Government were wide-ranging and varied. There were many options, starting from either end of the spectrum. 

Ben Gummer:  This is a welcome breath of realism from the Opposition; they are at least conceding that choices must be made. However, on the other points made, where was the amendment last night to find £200 million elsewhere in the Budget? There was none. The Opposition have made no positive suggestions. It would be good to hear them now. What would the hon. Gentleman sacrifice instead? 

Mr Mudie:  Will the hon. Gentleman give way? 

The Chair:  Mr Mudie, you know that you cannot intervene on an intervention. 

Mr McCann:  Give me 30 seconds to answer the hon. Gentleman’s point, and I will give way. I will answer it directly. We had an austerity plan in case of our re-election. However, should Government Members find the situation too tough and prefer us to handle it, we will be happy to take it on board at any stage. 

Mr Mudie:  The answer to the hon. Member for Ipswich is twofold. First, we wanted to discuss the estimates last night, but we were ruled out of order by the Speaker under Standing Order No. 55, so we could not discuss them, nor could any other Member. The figure of £555 million went through after 10 o’clock last night, and we were forbidden to speak about it. We would love to table an amendment to the regulations—it might even have the hon. Gentleman’s support—but the silly system for statutory instruments means that they are not amendable. 

The Chair:  Order. Mr Mudie, you will have to end your intervention. Mr McCann, can you draw your conclusions on the clause? I must give Mr Hoban the opportunity to respond. 

Mr McCann:  I will, Mr Crausby. I did not intend my contribution to be emotional, only to give evidence of what I witnessed at first hand in my own family. It is important to be able to bring experiences from outside the House into these Chambers so that people can hear about them. It is about choices. Government Members have made choices. They have chosen to be unnecessarily austere and not to support hard-working families, looked-after children, disabled children or families on low incomes. For all those reasons, this is a shameful piece of work, and I will vote against it. 

5.48 pm 

Mr Hoban:  It has been an interesting debate. I am not entirely sure that all the comments made by Opposition Members have been rooted in fact. A lot of suppositions have been made about the policy’s effectiveness; I will deal with them in a moment. 

Let me be clear about the challenge made by the right hon. Member for Delyn regarding the policies on which both coalition parties stood during the general election. He referred to my words on the statutory instrument earlier this year when the increase for disabled children was passed. Our manifesto commitment in April said that we would 

“cut government contributions to child trust funds for all but the poorest third of families and families with disabled children”. 

Nothing that we did then was inconsistent with the manifesto. 

My hon. Friends from the Liberal Democrat party took a more robust view of child trust funds, but the coalition agreement has been clear that we believe that the programme must be cut, because difficult choices need to be made about how we balance the books. Opposition Members have talked about their austerity plan, but none of us have seen it. In the eight weeks since the House returned after the general election, we have had Budget and Finance Bill debates, and the austerity plan has been mentioned, but we have not heard a single shred of detail about it. I take the comments about how Labour would saved in different ways with a pinch of salt, because we do not know what those different ways are. 

Let me deal with some of the issues that were raised, before returning to the principle behind the measure. The right hon. Member for Delyn asked what discussions we had had with providers and whether we could provide some certainty about what would happen to the plans in the future. I shall meet providers later this week to talk about how to take that forward. 

The right hon. Member for Sheffield, Brightside and Hillsborough talked about the Thoresen review. I point out to him that it was the Conservative party that first agreed to implement Otto Thoresen’s proposal for a national money guidance scheme. We made that commitment earlier than the previous Government did and, as I said earlier, we announced last week the roll-out of an annual financial health check to help families to think about their finances—both savings and debt. 

I point out to the hon. Member for East Kilbride, Strathaven and Lesmahagow that, as I said earlier, the additional payments that we would have made to disabled children will be used from 2011-12 to provide additional respite breaks. That will allow upwards of 8,000 week-long breaks a year. 

The right hon. Member for Delyn asked what would happen to the contributions made by the Welsh Assembly. That is a devolved matter. It is the Assembly’s choice whether it continues to make those contributions, and departmental officials have been in contact with Welsh Assembly officials to discuss that. 

The issue that Opposition Members raised was how effective the policy has been in increasing savings. There is no robust evidence to support their conclusions that there has been an increase in savings. The hon. Member

for East Kilbride, Strathaven and Lesmahagow said that we had gone from zero to something, but his right hon. Friend the Member for Delyn cited statistics from the Children’s Mutual showing that the contributions had gone up from £15 to £24 a month, so clearly we were not starting from a zero base. It is not clear what impact the child trust fund has had in terms of increasing savings, but let me give some figures that will help hon. Members. 

All children are entitled to have a child trust fund. If parents do not use the vouchers, a child trust fund is opened on their behalf; 74% of children have had an account opened. About 24% of families contribute to their children’s child trust fund, but only 13% of families on low incomes contribute to their children’s child trust fund. Those are the statistics that we have. 

We can compare the figures with those for ISAs, to which the hon. Member for Derby North referred. One third of adults have an ISA. There are more than 20 million ISAs in existence, and 14 million people contribute to ISAs every year. Children are not able to open ISAs, but one can be opened on their behalf. People are still able to continue to save either in child trust funds or in the other savings vehicles available. In contrast to the number of ISAs, 5.25 million child trust funds are in existence, so by far the biggest savings product is still the ISA. The savings rates are not as high as hon. Members suggested. Between 13 and 24% of all families and about 13% of families on low incomes contribute to their children’s child trust funds. 

Chris Williamson:  Has the Minister any figures for the number of families on low incomes who have opened an ISA? As the Minister concedes, every child who is born has a child trust fund opened on their behalf if one is not opened by their parents. 

Mr Hoban:  I do not know whether any analysis has been done of the social groups that have opened ISAs, but one argument advanced in support of child trust funds, to which the right hon. Member for Sheffield, Brightside and Hillsborough referred, was increased savings among families on lower incomes, so clearly a lot of work has been done to examine that area. 

The right hon. Gentleman talked about his aspiration for how the funds would build up over time. With regard to the differential contribution rates between average families and families on low incomes, it appears that a child in an average family would accumulate in their child trust fund about £4,700 and that the figure for a family on a low income is about £3,600. There is a difference in that respect. I just do not think that the case is proven that child trust funds have been as effective as people would like in boosting savings and creating a savings culture among families. 

That said, today’s argument is not about the merits of the child trust fund. It is about whether we can afford it. We are talking about £500 million a year. The choice that the Government face is this: if we keep the child trust fund, where do we cut spending? There were no ideas from Opposition Members about where those cuts should be. Do we increase borrowing? We know that actually we need to reduce borrowing to keep interest rates lower for longer. The Opposition have no ideas about whether to increase taxes to pay for the cost

of child trust funds. I put it to them that if we are to tackle the deficit, we need to make difficult decisions. They are not straightforward, but we have to face up to the choices we have. 

I am afraid that the coalition Government are prepared to face up to those choices: I do not see any sign that the hon. Member for Hemsworth is prepared to make those difficult choices. As the former PPS to the former Prime Minister, he knows just how afraid the last Government were to make those choices, but I will happily take his intervention. 

Jon Trickett:  We were perfectly happy to make very difficult decisions and I am proud of the role that I played in Government with the then Prime Minister. 

The Finance Bill now going through gives the power to assist the richest 300,000 people in the country to the value of £3.6 billion on pensions relief. It would be simple: £3.6 billion to the richest 300,000 income earners in the country, as opposed to less than £200 million to help the poorest children. That is the choice they are making. 

Mr Hoban:  There are two misunderstandings in the hon. Gentleman’s speech. First, the full-year cost of scrapping the child trust fund is £500 million, not £200 million. Secondly, in respect of the Finance Bill provisions regarding tax relief on pensions, if the hon. Gentleman had read the Red Book, he would have seen that there are proposals to replace that, so that the reduction in tax relief is safeguarded under an alternative regime. I am afraid that he misunderstands the point. 

The Government are prepared to make difficult decisions to safeguard the recovery, to tackle the legacy of the previous Government. These are not straightforward decisions to make, but I believe this is the right decision in the long-term interests of families in this country, who know that the Government want to see interest rates remain lower and the economic recovery starting, so that there will be more opportunities for young people in the future. I commend this measure to the Committee. 

Question put.  

The Committee divided: Ayes 10, Noes 7. 

Division No. 1 ]  

AYES

Glen, John   

Goldsmith, Zac   

Goodwill, Mr Robert   

Graham, Richard   

Griffiths, Andrew   

Gummer, Ben   

Hands, Greg   

Hoban, Mr Mark   

Swales, Ian   

Williams, Stephen   

NOES

Blunkett, rh Mr David   

Hanson, rh Mr David   

McCann, Mr Michael   

Mudie, Mr George   

Paisley, Ian   

Trickett, Jon   

Williamson, Chris   

Question accordingly agreed to.  

Resolved,  

That the Committee has considered the draft Child Trust Funds (Amendment No. 3) Regulations 2010. 

5.59 pm 

Committee rose.