| Child Trust Funds Bill
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Ruth Kelly: The hon. Gentleman persists in defining the success of the child trust fund largely in terms of developing the savings habits of parents and encouraging the shift between consumption and Column Number: 217 savings. Occasionally, he admits that it may impact on the assets available to a child at the age of 18, but he persistently ignores the objectives of helping people understand the benefits of saving and investing, and building on financial education to make people better aware of the financial choices that they face through their lives. If the policy is successful, 18-year-olds will have a different range of opportunities open to them. That aspiration lies behind the policy, but it is not easy to set targets for or to measure.I shall tackle the specific point about targets for saving, and whether we should measure the success of the policy by how much money parents add to the account. I contend that the policy would be a far more significant success if children occasionally put a sum from their pocket money into the child trust fund account. That would result in a lower savings rate than the hon. Gentleman's implication that parents will pay a regular contribution, but it might have a more profound effect on the behaviour of an 18-year-old, and the choices that they subsequently make. Those reasons reflect the philosophy behind the child trust fund, which the hon. Gentleman clearly does not share, and his suggestions are therefore inappropriate. The Bill represents an opportunity for families, parents and children. That does not mean that we will not monitor and regularly evaluate the plan as it progresses. We will of course set success criteria. They might include the extent to which parents understand the child trust fund, the extent that the fund increases savings by children as well as for children, and the assets built up in the long term. We would also examine the degree of financial awareness among children as well as parents. Many objectives behind the Bill do not lend themselves to easy measurements and targets. The hon. Gentleman misunderstands the fundamental purpose of the Bill, and that is clearly expressed in his opposition to it. For that reason, I ask the Committee to reject the new clause and the amendments. The Chairman: I apologise to the hon. Member for Tatton for neglecting to notice that new clause 13 is in his name. I call on him to speak before the reply from the hon. Member for Yeovil. Mr. Osborne: Yes, I have my own clause in this group. New clause 13 asks the Treasury to
Column Number: 218 she wanted to achieve. The Treasury is very keen to set targets for everyone else in Whitehall, but strangely reluctant to set targets for itself.
11.15 amWe can imagine what would happen if any other Department went to the Treasury and said, ''Look, we have a great idea, Chancellor. It hasn't been tried anywhere else in the world and we don't have much evidence to suggest that it'll work. We have a couple of encouraging surveys, but we haven't done any research and we do not propose to set any targets. The whole thing will cost £235 million a year. Will you sign on the dotted line?'' Of course, the Chancellor or the Chief Secretary would send that Department packing, but it helps if one is an insider in this Government and works within the Treasury when one comes up with expensive schemes that are not research-based or evidence-based. Indeed, it could be said that that is what happens when the Department that controls expenditure is itself turned into a spending Department. I predict that we shall see more of that as the Treasury takes on this sort of function. New clause 13 would require the Treasury to publish an annual report on the effect of child trust funds on wealth distribution in society. The Financial Secretary has said repeatedly, including in the policy document originally, that child trust funds have four objectives: to help people to understand the benefits of savings; to encourage them to develop the savings habit; to ensure that all children have a secure financial asset; and to build on financial education. However, we know that she has a fifth objective. It is not spelt out in the policy document—she must have forgotten to include it—but she revealed it to the assembled luminaries at No. 10 Downing street when she addressed the Institute for Public Policy Research summit on child trust funds in 2002. Thankfully for the Committee's enlightenment, I have been able to obtain a copy of the minutes of that meeting. The relevant section is entitled
Column Number: 219 I suggest, as I did on Second Reading, that child trust funds may exacerbate wealth inequality in our society, because children from far better-off households will, at the age of 18, have assets worth £15,000, £25,000 or £35,000, whereas children from the poorest families, who will make no contributions, will have assets of £1,000. That is a clear inequality. Of course, children from better-off families have more assets in theory anyway, but even wealthier families tend not to save for their children. One survey has shown that remarkably few people save for their children, so in fact children from wealthy families do not have assets at the age of 18, whereas if the Bill is a success, they may have thousands of pounds worth of assets.It is perfectly possible that child trust funds will increase, rather than reduce, wealth inequality. Like the Prime Minister, I do not think that that is a problem, because I do not think that wealth inequality is such an important measure. I remember him being pressed on that on the ''Newsnight'' programme during the general election. He repeatedly refused to answer Jeremy Paxman's question about whether it mattered if the gap between the rich and the poor was getting wider. The Prime Minister was right in saying that it does not matter, provided that the least well off in society are getting richer. I am happy to support the child trust fund on the grounds that it helps poorer families to build up assets, regardless of the effect that it has on better-off families. I am not concerned about wealth inequality, because I share the Prime Minister's view, but I know that the Financial Secretary sets her course by a different star in the Government. In the IPPR summit, she identified the growing wealth inequality under Labour as a problem and said that child trust funds are part of the response. If the Financial Secretary is so confident that child trust funds will work and reduce, rather than increase, wealth equality, I should have thought that she would welcome new clause 13. It would give her a chance to demonstrate the success that her policy is having each year. Ruth Kelly: The hon. Gentleman makes an interesting point about wealth inequality. I thought for a moment that he was going to announce that he had converted to a different course, and I was going to regret the fact that the Conservatives had not converted earlier. Now, it is revealed that he is not a convert, as wealth inequality does not matter to him. Wealth inequality matters to me not only because wealthy people have more than poorer people, but because it is possible to have a situation, as we did in the 1980s, in which poorer members of society have no stake in the system. They can have no assets behind them and no access to the opportunities that other people in society take for granted. Up to a point, wealth distribution is a proxy for the distribution of Column Number: 220 opportunity in society. I am concerned that people from all income and wealth backgrounds have opportunities. In particular, that means enhancing the life chances of those on the bottom rungs in terms of both income and wealth.Mr. Osborne: Will the Financial Secretary repeat what she has said in private, which is that wealth inequality is increasing? It would be useful if we accepted that as a starting point. I fully accept her argument that we want to increase the assets, savings and wealth of the poorest, but she identified inequality—usually understood as the gap between the richest and poorest—as the problem. If she repeated her statement that wealth inequality is increasing, that would help us start from an agreed basis.
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| ©Parliamentary copyright 2004 | Prepared 20 January 2004 |
