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Baroness Wilcox: I am disappointed with the Minister's response. I cannot express the position any better than my noble friend Lord Naseby did. So, disappointed, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 52 not moved.]

5 p.m.

Baroness Wilcox moved Amendment No. 53:

The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 54. For the convenience of the Committee, I have grouped with these amendments our opposition to the Question whether Clause 9 should stand part of the Bill. Each addresses means testing, which is at the heart of the supplementary contribution proposed in Clause 9. We are concerned with the increasing level of means testing that the Government have introduced since 1997.

I shall deal first with the two amendments specifically, before turning to means testing more generally. Amendment No. 53 challenges why a parent must have established a claim for child tax credit before his or her child can have the supplementary contribution. Parents may not want to claim child tax credit. Not all parents want to submit to the indignity of claiming benefits, even if they are called credits. What take-up of child tax credits do the Government expect? How many children will that exclude from the supplementary amount? The Minister will be aware that take-up rates of other means-tested benefits can fall as low as 20 per cent, as in the case of the short-lived baby tax credits.

The second amendment would remove the second leg of the conditions provided for in Clause 9(5). Not only must the parent have claimed child tax credit; the parent's income must be lower than the threshold of 13,230. Child tax credit is payable in reducing amounts to parents whose incomes are higher than 13,230. But there is a cliff edge for the purpose of the supplementary child trust fund payment. An additional 1 income for a parent means 250 less for the child. Does the Minister really think that that is fair?

Those are the technical points, but behind all of this is the intruder state. The Financial Secretary told the Standing Committee in another place that 40 per cent of children will be eligible for the supplementary contribution. So we will be starting the lives of four in 10 children born each year with the personal stigma of being means tested. That will be added to the stigma of those who receive free school meals. Children are starting life with a disadvantage imposed by the Government. We are concerned about that, and we are not alone, as the Child Poverty Action Group shares our concerns.

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The Government will start 40 per cent of people's lives on means testing, and by the time they retire around 60 per cent will be on means-tested pension credit. We find that a disturbing trend. The Government will justify that by saying that they are trying to help poor people, and may even claim that making them dependent on means testing for their child trust fund will magically make them asset owners and savers. But they seem blind to the increasing way in which they are taking money in tax and national insurance, even from the poor, in order to give it back on condition that they specifically claim it and subject themselves to a means test. That is not our way. I beg to move.

Lord McIntosh of Haringey: I am puzzled by the contrast between this group of amendments and that which we have just debated. In the debate on the previous amendment, the Conservative Party was keen to ensure that a supplementary payment would be not less than the original payment; in other words, not less than 250. Now it is being said, certainly by opposing the Question whether Clause 9 should stand part of the Bill, that there should be no progressive payment at all. That is what Clause 9 does. If you remove that clause, there will be nothing left.

I assume that the intention of replacing "entitled to" with "eligible for" is to make eligible the children whose parents have not claimed child tax credit but would be eligible to do so. One must still know whether or not they are eligible, so one still has what the noble Baroness, Lady Wilcox, calls a means test. I am puzzled by the amendments. Child tax credit is an enormous success as regards take-up. The threshold brings 40 per cent of all children into the higher rate endowment. Five and a half million children live in households with an income of less than 13,230. To remove the threshold completely would bring in 430,000 children, some of whom would be in families of very reasonable incomes—up to 55,000—and that does not seem defensible. The child tax credit is being taken up very successfully. By January 2004, the numbers who had taken it up since April 2003 were already 100 per cent of what we expected at the end of a full year. The amendments do not get rid of a means test. They simply ensure that those with fewer needs should get the supplementary payment. That is then contradicted by the proposal to take out Clause 9.

Lord Naseby: The Minister does a disservice to my noble friend. She made it clear that in this Committee she is probing the Minister for his response. The Minister's response was pretty woolly in relation to child trust credit. He said that basically after nine months the Government have hit their one-year target; that the whole thing is running smoothly and swimmingly; and that it is an enormous success.

My noble friend asked what percentage of people eligible for child tax credit are not taking it up. What happens to those children? That was her question. I would expect the Minister to have that answer to hand.

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The matter was raised at Second Reading, so it is not a new question. I am disappointed that he was unable to give an answer, but perhaps he overlooked it.

Lord McIntosh of Haringey: I can say that 6 million children are benefiting from the child tax credit. If I can add anything further, I shall do so in writing to the noble Baroness, Lady Wilcox, and the noble Lord, Lord Naseby.

Lord Naseby: This is an important dimension. It is the children who are eligible in the families not claiming about whom we should be concerned. That is the issue that on Report I shall want to follow further.

Lord McIntosh of Haringey: It is a little more complicated than that. The effect of the amendment would be that the Revenue should spend a great deal of time trying to contact parents who have not made themselves known by claiming the allowances to which they are entitled. No government have given high priority to that.

Baroness Wilcox: I thank my noble friend Lord Naseby very much for emphasising the question that I asked. I am sorry that the Minister is unable to answer today. Perhaps he will write to me with that answer because we are talking about people who will not claim; people who cannot bear to do so and therefore would disadvantage their own children. I await the Minister's reply in writing. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 54 not moved.]

Clause 9 agreed to.

Baroness Wilcox moved Amendment No. 55:

    After Clause 9, insert the following new clause—

(1) If this section applies to a child, the Inland Revenue must inform the account provider with whom a child trust fund is held by the child that this section applies to the child.
(2) If the account provider makes a claim to the Inland Revenue in accordance with regulations, the Inland Revenue must pay to the account provider such amount as prescribed by regulations.
(3) The amount prescribed by regulations under subsection (2) shall be calculated so as to represent a percentage of the average value of subscriptions to child trust funds made during the preceding financial year.
(4) On receipt of payment the account provider must credit the child trust fund with the amount of the payment.
(5) This section applies to a child if—
(a) a child trust fund is held by the child, and
(b) the child was first an eligible child by virtue of section 2(1)(b)."

The noble Baroness said: Amendment No. 55 would insert a new clause after Clause 9. The other amendments in this group are consequential. We return to the topic of children in care, which we have debated a little in connection with earlier amendments. The one thing that we know about children in care is that they start their adult life disadvantaged. Currently, they have extremely low educational

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achievements. Barely more than one half of those children have one GCSE compared with 95 per cent of all other children. The position is not improving: the Government have even dropped their own modest target of increasing basic educational achievements.

Children in care are less likely to be in higher education or in employment when they leave school. Sadly, they are more likely to be on the wrong side of the criminal law. A looked-after child will qualify for a higher amount of 500 when his child trust fund is opened—at least, that is what the draft regulations provide. That does not appear to be required under the Bill. Perhaps the Minister would state the long-term intention of the Government for payments to the child trust funds of looked-after children. Would he also state why the entitlement to a higher or supplementary amount for looked-after children is not in the Bill?

The child is unlikely to have any further contributions paid into his account if he remains in care. Of course, some children move in and out of care and it may be that the children's parents or other relatives will contribute something, but we should not expect this to be the norm.

Our new clause would require the Inland Revenue to pay into the looked-after child's trust fund an amount which will equate to the average amount paid into all children's trust funds. If the scheme is successful overall and the average annual contribution to child trust funds is, say, 500, the Government would have to specify what percentage of that amount should be paid to the child trust funds of looked-after children. I hope that they would specify at least 100 per cent so that looked-after children benefit rateably with other children in society.

At the Report stage in another place the Financial Secretary said little more than that in the next 15 years or so the position of looked-after children would be examined further. But if child trust funds are to accumulate to any significant amount to help a young person leaving care, extra contributions need to be made throughout the 18 years, preferably as early as possible so that the amount can accumulate.

We should remember that, with no family behind them, the transition of a looked-after child into independent adulthood is a particularly testing time. Pathway plans and the like are all very well, but if there is one group of children that needs a proper financial start in adult life, it is this.

At this stage, my amendment is a probing one, which I am sure can be improved technically. For example, I am not certain how best to deal with children who move in and out of care. The amendment does not tackle this, but I assume that further regulation-making powers could do the trick. Can the Minister clarify the situation for such children? I beg to move.

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