| Child Trust Funds Bill
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Ruth Kelly: The hon. Gentleman is correct to state that underage parents are the prime source of children in the category of having no one with official parental responsibility for them. But children fall into other categories where no one has defined parental responsibility. I mentioned children who live with grandparents; often, the grandparent does not have full responsibility. There are other situations, too, in which a child is living away from parents with a responsible adult who does not have full parental responsibility. There are many different situations—the child could have special guardians, for example. Other individuals apart from parents—adoptive parents, step-parents and so on—have parental responsibility. Special guardians fall into the second category of person who has parental responsibility. This clause is designed to pick up those children for whom nobody has parental responsibility. Parental responsibility does not refer just to the child trust fund; the definition goes wider than that. Mr. Osborne: I repeat, could 16 and 17-year-old parents nominate their parents—the child's Column Number: 104 grandparents—to be the responsible person to set up the child trust fund account, or would the Inland Revenue have to do it on their behalf? It would make more sense to allow a grandparent to do it on the child's behalf.Ruth Kelly: I take the hon. Gentleman's point. I promise to look at the matter and come back to him. There will be categories of person for whom no one is willing or prepared to accept parental responsibility on behalf of the child, and the provision is clearly needed so that the Inland Revenue can allocate the account accordingly. On that ground, I ask the hon. Gentleman to withdraw the amendment. Mr. Osborne: I am grateful that the Minister will consider my specific point about allowing grandparents to act as the responsible person where the parent, for whatever reason—perhaps because they are under age—is unable to do so. With that assurance, I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn.
1 amMr. Osborne: I beg to move amendment No. 120, in
The amendment touches on an issue raised in the earlier debate between my Liberal Democrat colleague and the Minister. It strikes me that subsection (5), which states:
is an attempt by the Inland Revenue to duck its proper responsibilities. No one, apart from perhaps the hon. Member for Yeovil, would expect the Inland Revenue to be held accountable if a Revenue-allocated account performed poorly because the stock market went down. Investments hold inherent risks, and even this Government are not to blame for them—at least, they are not to blame only when the stock market is increasing. It is possible to imagine circumstances in which the Inland Revenue chooses a financial provider that is not up to administering Revenue-allocated accounts, when the Inland Revenue should have foreseen that. As I interpret subsection (5), and maybe the Minister will correct me, the child trust fund holder would not have recourse against the Inland Revenue in those circumstances. The explanatory notes state clearly that subsection (5)
As I say, the Inland Revenue may not have properly assessed whether an account provider is able to administer Revenue-allocated accounts. Surely in those circumstances, where the Inland Revenue is at fault for not doing its job properly in selecting account providers, a child trust fund provider should have recourse to law and the Inland Revenue should be held responsible for its actions. Mr. Laws: I am not going to be as generous as the hon. Gentleman, although we have signed up to his amendment. I am concerned that the clause involves Column Number: 105 the Inland Revenue and the Treasury essentially giving advice and making decisions, but then accepting no responsibility for the providers selected or for the asset classes in which the child trust funds are invested on behalf of those individuals for whom the Inland Revenue assumes responsibility.I understand why the Minister is concerned that we ensure that those people who do not have family to manage their child trust fund accounts have their interests taken into account, and have the returns from their account maximised. That is why the Minister made the decision about the equity-skewed account. However, if the Minister is going to act in loco parentis to that extent, it is not good enough for the Inland Revenue to simply wash their hands of the credit and other risks that may be assumed to be dependent on the provider involved in an individual's account and the performance of the investment over a long period. I am not going to go back over the examples that I cited earlier, but they are relevant to this amendment. If the Inland Revenue tries to exercise responsibility for, and take an interest in, particular vulnerable group of people, as implied by its decision to select an equity investment, that cannot be the limit of its involvement in respect of credit risk and market risk. I can only hope that the Minister's comments about the potential involvement of the Solicitor-General indicate some flexibility on this point. Ruth Kelly: It is important to say that even if the Inland Revenue has allocated an account, it is perfectly possible, indeed desirable, for parents to exercise their free choice and change the provider of the account at any time during its operation, even when children are in local authority care. With the vast majority of children, it remains the case that somebody exercises parental responsibility on their behalf. We would expect them to exercise that choice in due course and to move to a different provider if they thought that that was the better option for their child. I do not believe that the Inland Revenue will act as a financial intermediary, as the hon. Gentleman suggests. If there are issues surrounding providers and the accounts that they offer, consumer protection will be delivered. The FSA approves providers of CTF accounts, and the financial ombudsman exists to deal with complaints about firms and investment advice. The financial services compensation scheme acts as a safety net if FSA-authorised firms go out of business. However, there will be no market relationship between the Inland Revenue and the child. We have tested that advice legally, but the Government have a duty to ensure that the accounts are allocated to children. Mr. Laws: Will the Minister tell us more about the extent of the compensation that would be involved if a CTF provider were to go into liquidation? What amount of investment in a CTF account would be covered in those circumstances? Ruth Kelly: The hon. Gentleman may be aware of the limits that operate under the financial services compensation scheme, but if he is ignorant of them, I will inform him. The maximum level of compensation Column Number: 106 for deposits is 100 per cent. of the first £2,000, and 90 per cent. of the next £33,000, so a child trust fund holder could lose 10 per cent. of the value of the fund in excess of £2,000, but that first £2,000 would be fully covered. That offers adequate protection while ensuring that there is no risk of moral hazards arising for providers.Mr. Osborne: Before the Minister finishes I want to turn her attention to a point that I raised. The FSA will certify providers as being able to provide Revenue-allocated trust funds, but not necessarily in large numbers. If it were able to do so, the burden would fall on it. However, if the Inland Revenue is to decide whether companies are able to provide Revenue-allocated accounts, subsection (5) should not remain in the Bill. Ruth Kelly: No, I make it clear that the FSA is responsible in that situation. However, if the Revenue has independent information about a provider, it would be up to it to notify the FSA of any concerns. It is also incumbent on us to ensure that adequate information is available to parents, even if they do not exercise their choice of provider. We have commissioned research into the best way to communicate with parents when they receive a voucher for the child trust fund on the birth of their child. We intend to build on that in future to maximise parents' opportunity of understanding the product on offer and exercising their choice in the best interests of their child. Mr. Osborne: It is interesting that, as the Minister just said, if the Inland Revenue had independent information about a financial provider, it would be forced to pass that information to the FSA, because one could read subsection (5) as giving it immunity from being held responsible for any failure to do so. However, I will not push for a vote on the amendment, because I suspect that the courts would ignore subsection (5) and hold the Government to account. The hon. Member for Yeovil was surprised that the Minister knew all about financial compensation. He will remember that she is one of the few people who have read the Penrose report; those issues are at the forefront of it. I will not embark on a debate about that or I will receive a thousand letters. I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn. Clause 6 ordered to stand part of the Bill.
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