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Lord McIntosh of Haringey: My Lords, let me start by acknowledging first that the noble Baroness, Lady Wilcox, obviously feels strongly about this issue, and I respect that. Secondly, I acknowledge that she has thought about the issue since Grand Committee. She has amended her proposition so that it would no longer be an offence, to use the example that we had in Committee, for a parent to pay for driving lessons at the age of 17 in the expectation of getting the money back when the child trust fund matures at the age of 18. That is helpful.
We are left with the fundamental proposition that the noble Baroness is putting forward, which creates two new criminal offences. Under subsection (1) it would be an offence for anyone to induce a child—the noble Baroness said "or attempts to induce", but that is not what her amendment says—to assign, or agree to assign, the investments within their child trust fund or to charge or agree to charge those investments. Subsection (2) defines the punishments attaching to those offences.
I hope that we made our position clear in Committee. Our view is that this new clause is legally inappropriate. The current drafting of the Bill ensures—in Clause 4(1)—that any assignment of or agreement to assign investments under a child trust fund and any charge on, or agreement to charge, any such investments is void, so that it has no legal effect. Clause 4 therefore removes any incentive for a loan provider to use a child's trust fund investment. There is no advantage for them to do so.
If however, despite this—this is the loan shark example that I assume that the noble Baroness, Lady Wilcox, is talking about—the child trust funds are used to secure a loan, despite these provisions, the young adult at the age of 18 will be able to recover the funds, relying on Clause 4. The security will be made legally ineffective, and the child trust fund assets will be reinstated through the courts. There are additional safeguards against borrowing, for example, from loan sharks, in the fact that withdrawals from the account are not permitted while the child is under 18.
The noble Baroness, Lady Wilcox, asked about penalties. Surely, the most important thing is that the courts are able to order that the money should be given back. That is really what we want to achieve, and I do not accept that making it an additional offence to attempt to induce funds is necessarily the right thing.
However, I ought to respond to the noble Baroness, Lady Wilcox, to this extent. Between now and Third Reading, I will look into whether other aspects of the law—those aspects that might conceivably be brought into play if someone is doing something that turns out to be void—do bear on this, and whether there are any offences that might be relevant to meet the concerns of the noble Baroness. I frankly do not know the answer at the moment. I will find out, and I will write to her. The fundamental protection for the child trust fund is that any activity of this kind would be void, and the money would be recoverable through the courts.
Baroness Wilcox: My Lords, my heart was sinking when the Minister started speaking, because I thought that I was going to get absolutely nowhere here. His last two sentences have raised my spirits somewhat. It may be only a vain hope.
I cannot emphasise enough, or too often, that I have worked in environments where I have seen this happen to people. I have seen youngsters really intimidated by members of their own family. I have seen them working towards a sum of money being taken away from them. It is my intention, and always has been, in those circumstances to be an employer who could try to help a child in my employ. We must always be looking to encourage employers to explain what the rights of young employees are. Perhaps that too will happen.
If there is any activity that we can do that will make children run towards a policeman rather than away from a policeman, that must be a good thing. I am only too delighted to withdraw the amendment, in the hope that the letter that I will receive from the Minister will move us a little more towards some form of punishment.
Amendment, by leave, withdrawn.
8 p.m.
Baroness Noakes moved Amendment No. 7:
- After Clause 4, insert the following new clause—
The noble Baroness said: My Lords, I rise to move Amendment No. 7, which inserts a new clause after Clause 4. This is an enabling provision, which does not commit the Government to do anything specific. It simply allows them to ensure that child trust funds are not taken into account for benefits and credits to be specified in regulations.
In Grand Committee, I spoke to a more complex amendment that purported to specify particular benefits. Of course, for a scheme that is intended to run for 18 years or more, in that circumstance it would be silly to specify the benefits. Therefore, the formulation in this amendment allows the Government to specify the benefits or credit by regulations. I hope that this formulation—if I may term it thus—is Hollis proof; that is, that the noble Baroness, Lady Hollis of Heigham, would not object to it.
The Government are trying to break the mould of attitudes to savings and to ownership of financial assets with their child trust fund project, in particular, with those groups who have not saved or have not traditionally had financial assets. However, the arm of government that deals with the social security system has a different approach. That part of government sees financial assets as a reason not to pay benefits. If the assets are kept, they can result in a denial of benefits. If they are spent, the capital deprivation rules can have the same effect. So the poor on income-related benefits find themselves in a no-win situation.
Since Grand Committee, the Minister has confirmed in correspondence that a child trust fund would not be counted as the capital of parents while the child is under 18 years old. It would come into play only once the child has access to the fund at the age of 18. That still leaves the issue of the income-related benefits entitlement of an 18 year-old or—a point made by the noble Baroness, Lady Hayman, in Grand Committee—of a parent whose child has died who has inherited the child trust fund. It certainly leaves the general issue of capital deprivation by recipients of child trust funds.
Amendment No. 19 standing in the name of the noble Baroness, Lady Hayman, deals with the issue of capital deprivation more comprehensively than my amendment. In addition to that amendment, there is the issue of capital deprivation by donors to child trust funds. The Minister's letters to me did not allay my doubts that there would be a postcode lottery in that area.
The Government's response has been that they will disregard the first £6,000 of capital and that a further review of the threshold is "a real possibility". That is nothing like enough to ensure that child trust funds will be left out of account in calculating income-related benefits. The Government's social security approach is at odds with their desire to create a new savings paradigm. Why should a poor family think about saving if it might be neutralised by the benefit and tax credit system? I beg to move.
Baroness Hayman: My Lords, in speaking to Amendment No. 7 moved by the noble Baroness, Lady Noakes, I shall speak also to my Amendment No. 19. As the noble Baroness said, it deals more comprehensively with capital deprivation rules, but, I fear, perhaps less correctly in terms of drafting. I suspect that it is not Hollis proof. As the noble Baroness, Lady Noakes, said, this is an issue of
It seems that we have been universal in ensuring that the tax benefits within the scheme are available to everyone, including higher rate taxpayers as well as standard rate taxpayers. But when we come to the fruits of a child trust fund, we run into the issue of the interplay between the social security system and the child trust fund. There is the possibility that the poorest 18 year-olds with trust funds would find that, in some ways, the trust funds are a financial liability rather than an asset. If they are on an income-related benefit, they run the risk of losing some or all of that benefit because they have capital above the £6,000 that the Government suggest would be adequate. But, as the noble Baroness, Lady Noakes, pointed out, if in better times for those particular families serious deposits were made over 18 years, it is quite possible that there would be enough in the child trust funds to take the 18 year-olds well over the £6,000 limit, particularly if there are other assets. The benefit might therefore be reduced. My amendment deals particularly with capital deprivation.
Equally, if an 18 year-old was to spend that money on something that was not a rave, drugs or drink, but possibly spend it on a car—which might be particularly important at that time for the person to be able to get a job and a start in life—or to pay for a course that was not funded in any other way, there is the risk that he would lose out because he has been seen deliberately to deprive himself of the capital.
Exactly the same problems would arise where parents inherit a child trust fund when a child has died before the age of 18. In Grand Committee, I referred to the number of deaths of under-16 year-olds in this country as being around 5,000 deaths per year. I said that one could take 10 per cent perhaps of those families—a higher number than would normally be on benefit—as being affected by these rules. I was shocked when I posed a Written Question on this issue, answered on 19 April. The noble Baroness, Lady Hollis, as I suspected, could not answer exactly my question; namely,
One third of children who die before the age of 16 come from families dependent on social security benefits. So this is not as small a problem as we had originally thought. It is an important matter of principle. I had a helpful meeting with the Financial Secretary to the Treasury, and I am grateful to her. She wrote to me subsequently seeking to reassure me about
I accept that, but I would be more comfortable to see it in black and white. Where there is an element of discretion, there is always the possibility that rules and guidance will be interpreted differently. I hope, therefore, that my noble friend will look again at the issue. It is a question of whether the families of the poorest children in our country will benefit to the full from the scheme.
I should like to record that the reason I came to this issue is neither because I am normally that assiduous on these matters, nor because a pressure group raised the issue. A great friend of mine, at the age of 90, remains as deeply concerned about child poverty and family welfare as she has been for seven decades. She has twice my 35 years' membership of the Labour Party. She chided me that the Government of which I am a supporter and was once a member are bringing in rules that run the risk of depriving the families of the most vulnerable children and young people in this country of the benefits of this scheme while safeguarding the tax advantages for others. Her name is Peggy Wynn. She has been for many decades a doughty and well-informed campaigner. I think that my noble friend knows her well, and I hope that he will be able to reassure us by accepting the amendments.
"INCOME-RELATED BENEFITS, ETC.
(1) In determining the matter specified in subsection (2) no regard shall be had of income and gains arising on—
(a) Inland Revenue contributions to a child trust fund;
(b) subscriptions to a child trust fund;
(c) investments under a child trust fund;
(d) investments or other assets derived from a child trust fund.
(2) Those matters are—
(a) eligibility for,
(b) entitlement to, and
(c) levels of,
the benefits and credits that are specified in regulations."
"What proportion of those under the age of 18 who die each year are members of families dependent on income-related social security benefits".
The noble Baroness kindly took the social fund funeral payments as a basis and extrapolated the result. The end conclusion was:
"Of those under the age of 16 who die each year the proportion who are members of families where a funeral payment is claimed and the claimant is eligible is therefore approximately 32 per cent".—[Official Report, 19/4/04; col. WA 13.]
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