| Child Trust Funds Bill
|
|
Mr. Laws: I shall not repeat the hon. Gentleman's comments on the first amendment, since they were designed to probe the Government's intentions for the time period that will be set out in regulations and the Bill. I shall briefly comment on the second issue that he raised, which was the means of contributing to the child trust fund, and whether that should be restricted to vouchers and cash amounts, or whether the Government should consider electronic payments. Amendment No. 166 to clause 12, which sets out subscription limits, would require the Inland Revenue to publish proposals for subscriptions to be made to child trust funds by electronic means. Under clause 12, there is a restriction to ensure that contributions can be made only in monetary form and not with other products, such as equity products. However, as the hon. Gentleman indicated, the Government have Column Number: 089 been reticent about embracing new technologies available to facilitate payments into child trust fund accounts.The initial voucher payment made in paper form by the Inland Revenue may help consumers understand that a new product is being launched. The Minister is nodding and I hope that she will still be nodding after my second comment. She has a tendency to nod and then say something contradictory later. I accept that a voucher might be helpful when setting up the child trust fund, so my moderate amendment merely asks the Minister to consider publishing proposals to allow future subscriptions to child trust funds to be made electronically. Given the amendment's extreme moderation, I hope that she will back up her nodding by making constructive proposals and assuring us that the Government are not luddite on contributions to child trust funds and will help to stimulate payments by other means, including electronic means.
10 amRuth Kelly: The hon. Member for Tatton started by asking a couple of more detailed questions about the structure of the child trust fund, including why we allow parents a year in which to exercise their free choice as to the provider of the child trust fund account. Clearly, we want the maximum number of people to exercise their free choice as to the provider, partly because through exercising that choice they begin to increase their financial awareness. We can use the opportunities for financial education around that. Those are two key objectives of the child trust fund. Indeed, the fund provides a tremendous opportunity for parents who have not so far engaged with the financial services industry to do so. It is far better for parents to exercise that choice than it is for the Inland Revenue to allocate families a child trust fund provider. The hon. Gentleman rightly points out, however, that there is a trade-off between allowing parents the maximum possible time and allowing the maximum time for the endowment to grow for the child's benefit. We have chosen the period of a year to strike a reasonable compromise between those two positions. We shall allow parents the opportunity to consider the information pack that is sent out alongside the voucher and to become aware of the publicity campaign that accompanies the launch of the child trust fund. We shall attempt to monitor the number of accounts that are opened over the first year of operation and into the future to see how long it takes the average parent to open an account and how many parents are failing to open an account as we approach the final months in the build-up to the cut-off point of a year. If a substantial number of families fail to exercise their free choice, the Inland Revenue will consider ringing them and reminding them that it would be in their interests to exercise that choice. We shall monitor that over the long term as we monitor and evaluate the policy itself. A year strikes a reasonable balance between the two objectives. Column Number: 090 Mr. Osborne: I do not know the answer to this question—one is always advised against asking such a question in Parliament—and perhaps the Minister can write to me if she does not have the answer to hand, but I should like to know what period people have to apply for child benefit and to have it backdated to the date of their child's birth. In addition, given that the Inland Revenue now administers child benefit, what modelling has taken place? Is there a clear pattern that if people do not do that in the initial few months, they will not do so at all and will have to be reminded? If so, perhaps the Minister could look again at the period of a year. It might help her to see the pattern for child benefit, because I suspect that the one for child trust funds will be very similar. Ruth Kelly: The hon. Gentleman makes an interesting point. He will be aware that I am not the Minister responsible for child benefit, but I will certainly consider that issue. Given that this is a new policy, I think that it is right to give people the maximum flexibility and opportunity to hear the financial education messages that the Government and, no doubt, providers and voluntary organisations will put out at the relevant time. We shall have an opportunity to remind parents during the year if we find that they are not opening accounts promptly. The hon. Gentleman also asks about fortnightly returns. Up to a point, that is the same issue. It has to do with a trade-off between providing maximum opportunity for the account to grow, and minimising any potential burden on providers. We do not think that it is necessary for providers to contact the Revenue on a daily basis to say whether they have received any new accounts. On the other hand, a month in the scheme of an 18-year policy is a significant amount of time. We think that two weeks is more appropriate, and that fortnightly returns should be created electronically by the providers using their software systems. The returns will be sent electronically via the internet. We do not think that sending fortnightly returns will place any significantly greater burden on providers. Indeed, the informal contact that the Revenue has had with providers exploring the issue suggest that they do not have a significant problem with that. In the interest of maximising the value of the endowment on behalf of the child, I suggest that a fortnight represents the appropriate length of time. To turn to the more fundamental issues—how we communicate the policy to parents, and whether a voucher is appropriate in the circumstances—I draw the Committee's attention to the Bill's objectives. Those are: to increase savings habits; to increase a person's assets at the age of 18; to create responsible consumers and—a key objective—to build financial education. I would argue that sending a family a voucher with the child's name on it, with the amount clearly expressed, is a valuable tool to increase financial awareness and will lead to an increase in habitual saving. I note that, in evidence to the Treasury Committee, the National Consumer Council, which carried out significant qualitative research among young people Column Number: 091 and parents, found that the voucher was very attractive. It said:
Mr. Osborne: I agree with everything that the Minister has said in the last few minutes. I am happy that people will be sent vouchers. I think that they will act as an incentive, and that it will be great to send people a cheque for £250 or £500. However, once people have received the voucher, they do not then have to take it to a bank or a building society to open the account. The voucher will have a unique number on it: people can then phone the bank, or go online and do it via the internet. That is my argument, and the Minister knows it. She is also aware that almost every financial provider that she has consulted has made that argument. Ruth Kelly: I am well aware of the point that the hon. Gentleman makes; he is quick to jump to his feet before I develop my argument. The voucher is, in principle, a powerful way of reminding people that they have that asset on behalf of their child. There is, of course, nothing to stop providers handling the administration of child trust fund accounts, either electronically or by telephone. The point that the hon. Gentleman makes is that we are insisting that, in due course, the paper voucher is produced, either in the post or personally. That does not strike me as an unreasonable requirement. Indeed, one of the requirements of the individual savings account, for example, is that providers store the application form for the account. The child trust fund is closely modelled on ISA provisions. I should like to correct a couple of misapprehensions under which the hon. Gentleman seems to be labouring. The first is that providers would have somehow to store a paper voucher for 18 years. In fact, a provider can scan the voucher in to the system and needs to store that scanned version for only three years, directly in line with the provisions of ISA accounts. That should not be such a burdensome requirement. The paper voucher also plays a vital part in reducing fraud, to which the hon. Gentleman alluded. While sophisticated fraudsters can produce a copy of any document, the voucher will be designed in a way to make copying difficult for the less sophisticated. The child trust fund providers will have a certain degree of confidence that a voucher accompanying an application to open the child trust fund is genuine. An electronic process would not provide that degree of certainty and could allow internet hackers to open multiple child trust fund accounts. The paper voucher will contain vital information in the form of a barcode or microline that will allow providers to scan the voucher and keep that information electronically. That is crucial for child trust funds, as Government contributions will be Column Number: 092 paid only where providers' claims reconcile with the Inland Revenue's child trust fund database.The hon. Member for Yeovil asked whether we would consider electronic payments to child trust fund accounts. I can inform him that this is possible under the legislation. The child trust fund account is modelled on the ISA model, where payments can be made by a number of means, including electronic means, and this is envisaged in the current set-up for child trust funds.
|
| |
| ©Parliamentary copyright 2004 | Prepared 13 January 2004 |
