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Lord McIntosh of Haringey: My Lords, the noble Lord will have an opportunity to reply; it is his amendment.
I pointed out in Committee that the main reason for requiring the voucher to be handed over was the efficient transfer of the data encoded in the microline on the voucher to the Inland Revenue. The noble Lord's response to that is that the information is incomplete. Of course, the implication is that we should include more information on the microline, rather than eliminate it altogether and
increase the risk of keying-in mistakes. It costs money for both the Revenue and providers to correct data-matching failures. Of incorrect combinations of ISAs, 30 per cent are due to that kind of failure. It costs less to prevent that happening in the first place, and vouchers do that in a way in which Internet or phone applications cannot. Providers will not have the burden of checking the details with which they have been provided; they simply relay the data on the voucher.As I say, I am a sucker for being told that I ought to get up to date and be all electronic and e-government. However in this case, whatever is done, the voucher is the most efficient way of dealing with the issues.
Lord Naseby: My Lords, it is very difficult to respond to a Minister who, for one reason or another, does not want to do online banking. He has probably never done it; I may be wrong, but I do not think he has or that he really wants to. That is the problem, as young people want to do online banking. I suspect that the Minister has grandchildren. If he does, he will know that households with small kids crying are pretty bedlam-like. The papers get removed here, there and everywhere, and although the beautiful voucher—a cheque in lieu—arrives, it gets lost. There is no hiding the fact that it gets lost.
However, returning to my key point—the 50 per cent example that I gave—the law requires at the moment that if someone makes a purchase in response to the Children's Mutual web site, that person can make an application but we have to send back to them a form to sign. The problem is that half of the people who are sent the form forget to fill it in. Most people then do so, after we send them a reminder. But, of course, that is a double transaction. That is what will happen with the vouchers. There will be a significant number of young couples who, for one reason or another, do not return the wretched voucher. We and every other provider will have to contact and remind them—and some people will then send in the voucher. All of that adds to the cost and aggravation for a young couple who have so many other pressures at home.
I must tell the Minister that Internet banking is exploding. It will not stop at its current level. It will grow and grow. Even the Minister will have to take part before too long. Therefore, I ask him to take back the matter again. I shall not press the amendment tonight, but it is a key issue. I have given evidence on microlining, and I shall send the Minister a further detailed note. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 [Initial contribution by Inland Revenue]:
Clause 9 [Supplementary contribution by Inland Revenue]:
Clause 10 [Further contributions by Inland Revenue]:
Lord McIntosh of Haringey moved Amendment No. 15:
- Page 7, line 16, at end insert—
The noble Lord said: My Lords, under Clause 10 the Government have powers to pay additional government endowments when children reach a specific age. A payment at age 7 has been announced, but the Bill allows future governments to make further payments at other ages if they decide to do so. As drafted, the Bill prevents such payments being made to the child trust fund accounts of children held in legal custody, as child benefit is not paid in respect of those children and the award of child benefit is the key eligibility requirement for child trust fund payments. That means that if a future government were to decide on payments to children at any age after 12, any child held in custody on the relevant birthday would not receive them.
Some people take the view that children in custody should not receive the payments, because that would be rewarding bad behaviour. But the Government do not believe that it is justifiable to disadvantage such children on the grounds that they were in custody on a particular birthday. To do so could lead to anomalous situations—for example, if a child were in custody for a long period but not on the relevant birthday and received a child trust fund payment, but a child in custody for a shorter period, including the relevant birthday, was excluded. The child trust fund is a long-term savings policy, and this group of children is likely to include some of the most disadvantaged and in need of help.
The amendment would allow such age-related payments to be made by the exclusion from child benefit for the purposes of Clause 10. I beg to move.
On Question, amendment agreed to.
Clause 12 [Subscription limits]:
Baroness Noakes moved Amendment No. 16:
The noble Baroness said: My Lords, in moving this amendment I shall also speak to Amendment No. 17—both are about the culture of savings theme, which we covered in earlier amendments.
Both amendments concern the annual limit on subscriptions to child trust funds that will be permitted. The amount is not specified in the Bill, but the regulations have now fixed that, initially, at £1,200 a year. Amendment No. 16 would replace the annual limit operating in each year with one that operated in respect of each year; and the intent is to create the possibility of carrying forward contributions from one year to the next.
In an ideal world people would commit to regular savings. We fully subscribe to that idea, and I am sure that the savings industry will want to promote it. However, not everyone who might wish to contribute to a child trust fund is able to take on a regular saving commitment. Some people have irregular income patterns while others, perhaps relatives, have no intention to contribute to a child trust fund on a regular basis. They might, however, think that some of the "rites of passage" events such as going to a new school or a confirmation would be an appropriate time to give money. The effect may be that in one year the limit will not be used, but in the following year when such a rite of passage takes place there may be an accumulation of money available for investment. Our amendment is therefore designed to accommodate the fact that in practice regular savings are not the only form in which money will potentially come into child trust funds.
In Grand Committee, the Minister said that providers would not be able to cope with that provision. I am confident that they could easily cope with it and would find a marketing advantage in telling people how much unused allowance they had so as to promote additional savings within the limit. It should not be necessary for every provider to offer a product if it cannot support it. But let those do so who can support variable amounts being contributed in a year, keeping track of the available limit, to see whether it is popular in marketing terms. Let the market decide on it. The concept of carry forward is not an alien one in tax law. Other allowances can be carried forward and they operate without problems.
Amendment No. 17 is a kind of "Rooker-wise" amendment, so I hope that the Minister will recognise its impeccable credentials which go with indexation in the tax sphere. It proposes that the £1,200 should rise annually with the RPI. I do not need to remind noble Lords of the insidious effects of inflation, even at the relatively low level of 2.5 per cent in RPI terms which we are currently experiencing.
In Grand Committee, the Minister said that the Government wanted to keep flexibility to manage the child trust fund in future years. "Flexibility", in government-speak, is code for chopping and changing at will. There is nothing in the amendment to stop the Government from increasing the limit beyond £1,200, but it prevents them from applying the kind of policies they have been applying to ISAs—that is, a combination of stop and go backwards.
The amendment is designed to increase confidence in the stability of the child trust fund regime and thus increase its attractiveness as a home for savings. I hope that the Government will see that the amendments are designed to improve the attractiveness of the child trust fund regime overall and I look forward to the Minister welcoming them with open arms. I beg to move.
Lord McIntosh of Haringey: My Lords, this is another example of what I referred to in responding to Amendment No. 1. This is a good, simple idea. Although it is new and therefore cannot be proved in advance, it has been thoroughly examined and consulted on to make it as simple and practical as possible. What is being proposed in an accretion on to it. And too many accretions, like shellfish—I say that to appeal to the specialism of the noble Baroness, Lady Wilcox—could be damaging.
The additional contributions that can be made into a child trust fund by family, friends or children themselves are an important part of the fund. And additional savings by family and friends could significantly increase the amounts which children receive at the age of 18. The child trust fund aims to encourage a partnership between government and families and to build on existing positive attitudes for saving for children.
Amendment No. 16 would allow for unused subscriptions for one year to be carried forward to the next. I appreciate the point that not all parents can contribute the same amount every year and I understand that there are parents who would like to make up contributions that were missed. However, I persist with the view that it would be more complicated for providers to administer and for the child trust fund account holders and their families to get to grips with. After talking to some of the providers, our understanding is that a single, regular annual limit encourages regular savings and provides well for modest contributors who will form the vast majority of those involved with child trust funds.
It would also be unwise to include in the Bill rules such as increasing the subscription limit in line with the RPI. I know that the noble Baroness, Lady Noakes, does not approve of it, but we have given flexibility to future governments to manage the trust fund in the light of future development needs and opportunities. It is not fair to say that that would necessarily mean a slow-down or a stop in further changes. Yes, Rooker-Wise is relevant. There would be pressure to increase the limits in line with the RPI. Our rejection of the amendment is not intended to be a restriction. We are simply saying that future governments should decide the limit. We will keep the subscription limit under review in the light of the progress of the child trust fund. I am not sympathetic to the amendments, as the noble Baroness, Lady Noakes, seemed to think.
"(4) For the purposes of this section, a child is to be treated as being an eligible child if entitlement to child benefit in respect of the child is excluded by—
(a) paragraph 1(a) of Schedule 9 to the Social Security Contributions and Benefits Act 1992 (c. 4) (children in custody), or
(b) paragraph 1(1)(a) to (d) of Schedule 9 to the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) (corresponding provision for Northern Ireland)."
Page 7, line 30, after "in" insert "respect of"
8.45 p.m.
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