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Standing Committee A
Tuesday 20 January 2004
(Afternoon)
[Mr. David Amess in the Chair]
Clause 27
Commencement
Amendment proposed [this day]: No. 145, in
2.30 pm
Question again proposed, That the amendment be made.
The Chairman: I remind the Committee that with this we are discussing the following: Amendment No. 147, in
New clause 5—Report on savings effect of child trust funds—
'The Treasury shall lay before each House of Parliament a report setting out the Treasury's estimate of the net increase in saving which will result from the provisions of this Act.'.
New clause 13—Annual report on effect of child trust funds on wealth distribution—
'The Treasury shall lay before each House of Parliament every year a report setting out the Treasury's assessment of the effects of the provisions of this Act on wealth distribution in society.'.
The Financial Secretary to the Treasury (Ruth Kelly): We had a very constructive debate this morning. When we adjourned I had just reached the conclusion of my remarks and, in the light of that debate, I urge the hon. Member for Yeovil (Mr. Laws) to withdraw his amendment.
Mr. David Laws (Yeovil) (LD): Thank you, Mr. Amess, and good afternoon to you on this final lap of proceedings in Committee. We had a very interesting debate on new clauses 5 and 13, and the hon. Member for Tatton (Mr. Osborne) explored in new clause 13 the extent to which the Bill would succeed in narrowing the wealth inequalities in society. I had hoped for a while, as the Minister had, that the thrust of his comments might mean that he was changing his mind on the Conservative party's support for this Bill. After all, the Conservative party has changed its line on tuition fees during the past couple of days, and I had hoped that what the hon. Gentleman said was a signal that he had been persuaded by some of the more sceptical members of his Treasury team that a more robust position on the Bill would be justified, but, alas, the hon. Gentleman pointed out that he does not have
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a problem with widening inequalities in society, even though dealing with that may be one of the supposed underlying objectives of the Bill.
I shall not press new clause 5 to a Division. I think that we have succeeded in exposing the bankruptcy of the Government's thinking in this area, not least that the Bill is presented as one designed to improve and increase the amount of savings in society. It is supposed to be evidence of that policy, but there is no evidence that additional saving will be encouraged as a consequence of the establishment of the child trust funds, and we note that the initial moneys paid into the child trust funds account will have to be borrowed by the Chancellor from the international financial markets, which raises the question of whether it is in the long-term interests of the country. We have exposed those issues during the debate, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Laws: I beg to move amendment No. 160, in
The Chairman: With this it will be convenient to discuss the following: Amendment No. 161, in
New clause 7—Proposals for conversion of child trust funds to tax-advantaged accounts for retirement saving—
'The Treasury shall lay before each House of Parliament a report setting out proposals for child trust fund accounts to become, on maturity, tax-advantaged accounts for retirement saving.'.
Mr. Laws: Again, we have a similar pattern of amendments and a new clause. Amendments Nos. 160 and 161 are enabling, tidying-up amendments that relate to new clause 7. New clause 7 deals with an issue that we touched on at the beginning of the proceedings of the Committee. It would require the Treasury to lay before each House a report setting out proposals for child trust fund accounts to become, on their maturity, tax-advantaged accounts for retirement saving.
The intention is to salvage something from the Bill, and invite the Government to consider what will happen to the child trust fund accounts on maturity. There is a serious problem involved in getting a large segment of the population to save for their retirement. No doubt a proportion of that problem is related to the low incomes that many people have that make it difficult to save for retirement.
Whether one likes or loathes the idea of the child trust fund, it seems to me that there is an opportunity to say to those young people who have had the child trust fund account since birth that they ought to think of it not as something that they raid at the age of 18 for business purposes or overseas travel, but as a savings account that they can use for the future, either to save for the everyday expenses and costs that arise early in
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people's careers, or to save for retirement in an environment where there is an increasingly complex pensions system that I suspect few people in the country, let alone Parliament, understand. The Government ought to take the opportunity afforded by the existence of the accounts to consider whether those accounts could mature into pensions savings accounts that would be tax advantaged. They would persuade people to take the responsibility for saving for retirement rather than relying on the means-tested benefits that are being introduced by the Government, many of which are powerful disincentives and some of which will probably not be around in 30 or 40 years when people retire.
This is the second time of asking for the proposal, and I invite the Minister to consider whether it is something that the Government might take up themselves at some stage.
Mr. Michael Jabez Foster (Hastings and Rye) (Lab): The proposal to convert the funds into retirement savings plans at the age of 18 is about as daft as anything that has been proposed. There is a practical reason why it is pointless. I suppose that it could be used by the Liberals to suggest that it is part of their pension planning, but it can have very little other value.
A pension retirement fund is, by its nature, blocked and incapable of use. Investments must stay in the fund, as with the child trust fund, and it cannot be drawn on. The idea of a fund—the very purpose of which is to enable students to have some cash at the age of 18—being locked again with the key thrown away until their retirement is difficult to understand.
The whole purpose of the fund is not necessarily to advantage the young person to go to university; it may be used at a later stage, such as after a gap year or the experience of employment. None the less, it is a fund that they can draw on even as a mature student to enjoy the benefits of higher education, or for a deposit on a house. The idea that it should be locked away forever, or at least until they reach retirement, would defeat its whole purpose, and I could not agree to it.
Ruth Kelly: I welcome the comments made by my hon. Friend the Member for Hastings and Rye (Mr. Foster). He clearly understands the purpose behind the Bill rather better than the hon. Member for Yeovil. I have often made it clear that there are multiple objectives behind the child trust fund because it opens up opportunities for young people at the age of 18 that they might not otherwise have. Were they to feel that they already had sufficient opportunities open to them at 18, because of parental backing, for instance, they could choose to put the money into a pension. There is nothing stopping them from doing that, although one may argue over whether it is in their best interests to do so.
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The legislation does not prevent young people from putting the money into a pension, so for the reason given by my hon. Friend and because freedom of choice is open to the individual, I suggest that the hon. Gentleman withdraw the amendment.
Mr. Laws: I am obviously disappointed at the reaction that my particularly modest new clause 7 has had. The hon. Member for Hastings and Rye and the Minister are right; it was nothing more than an act of charity held out towards the Minister in the hope that the Government might salvage something from their mess of a pensions policy and their ill-thought-out Child Trust Funds Bill. I can see that the Minister does not want to take up the olive branch. I therefore lay it down and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. George Osborne (Tatton) (Con): I beg to move amendment No. 190, in
clause 27, page 15, line 14, leave out subsection (2).
The Chairman: With this it will be convenient to discuss the following: Amendment No. 191, in
New clause 11—Prohibition on advertising in pre-election period—
'(1) The Government shall not advertise the introduction of child trust funds during a pre-election period.
(2) In this section, a ''pre-election period'' means any period that—
(a) starts with—
(i) the calling of a General Election by the Prime Minister, or
(ii) the day that falls twenty-five days before any Parliament shall cease to have continuance in accordance with the provisions of the Septennial Act 1715 (1 Geo 1 Stat 2 c 38),
whichever is the earlier, and
(b) ends with the day of the ensuing General Election.'.
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