Child Trust Funds (Amendment No. 3) Regulations 2010

I thank the noble Lord for his question. I think that it will relate to periods looking forward, on a rolling basis. However, I will let him know the base for this particular two-year period. I think that the point here is that the coalition Government will make every effort to protect the poorest in our society, including children, by a combination of measures, of which the cessation of the child trust fund is only one. Other points were made by the noble Lords, Lord Liddle and Lord Davies of Oldham, about protecting those on the lowest incomes and those with disabilities, and about the distributional effect of the child trust fund. However, as my noble friend Lord Newby pointed out, the evidence to date suggests that the child trust funds of children in better-off families are expected to be worth, on average, considerably more than those of children in lower income families when they reach the age of 18. The distributional impact is therefore not clear, and it may well be that on some of the estimates a child in a better-off family would have a fund amounting to some £4,700 whereas a child in a lower-income family would have one that totals only £3,600. We recognise the additional needs that face children with disabilities, and the Government will publish a Green Paper in the autumn to look at a wide range of issues for children with special educational needs and disabilities. To reconfirm the point I made earlier, from next year we will recycle the funding that would have been used to make the additional payments within the CTF to disabled children, and use those funds to provide additional respite breaks. I should also note that my noble friend Lord Newby pointed out alternative ways of delivering an increasing savings habit which we all want to see. The noble Lord, Lord Davies of Oldham, made the particular point that many young people are in debt at 18 and need the CTF. In that context, I again stress that we have announced plans for a free annual financial health check that will give everyone a chance to review their finances and get the help they need to take action to improve them. That will be launched nationally in spring 2011. The noble Lord, Lord McKenzie of Luton, asked whether the Government would reverse the abolition of the dividend tax credit changes that so dramatically hit pension funds under the previous Government. I regret to say that there are a lot of tax and other measures introduced under the previous Government that it might be highly desirable to reverse but which, regrettably, cannot all be dealt with. The coalition’s programme for government said that we would like to reverse this change, and we will revisit it when the public finances improve. My noble friend Lord Newby felt that the CTF would benefit the middle classes and not the poor, thereby benefiting the wealthy more. I have already touched on that point, and should now like to confirm the statistics. Only 13 per cent of families on lower incomes are making contributions each year, compared with 30 per cent of other families. Indeed, as one might expect, the contributions are likely to be lower for lower-income families. I can therefore confirm my noble friend’s point. The noble Lord, Lord McKenzie of Luton, asked a specific question on the financial health check and the social responsibility levy. I confirm that that levy is intended to fund the national financial advice service, which will include the annual financial health check to which I referred. However, we are ready to listen to views from everyone on how the Government should support debt advice. The noble Lord, Lord McKenzie of Luton, also raised some points about changes to tax credits and child benefit. I believe that I have already answered them. I stress again that I will get the baseline for him, but we are looking at that in the round with the intention of ensuring that the poorest children are protected. The last question, asked by the noble Lord and the noble Lord, Lord Morgan, was about the scrapping of the saving gateway. I have to come back to where we started. I fear that the saving gateway is in the same basket. With the unprecedented Budget deficit, we have to make some very tough choices. The saving gateway would have cost more than £300 million over the next five years, and it is unaffordable. We were also concerned that there was a lack of engagement from providers and that not everyone in the target market would have had easy access to a provider, so the Government have decided that the saving gateway will not be introduced. Again, I am grateful to those who have spoken in today's debate. The regulations form an important first step in implementing the Government’s announcement that we will reduce and then stop government payments into child trust funds. By saving £320 million this year and more than £500 million each year in future, we will make an important contribution to the reduction of Britain's unprecedented Budget deficit. I come back to where I started. Reduction of the deficit has to be our most urgent task, which is why we have taken the approach that we have of reducing government spending on the child trust fund as quickly as possible. It is a challenging task, which is why we decided that government payments should stop altogether to make the greatest contribution. I have stressed, and reiterate, that we are listening to noble Lords who have suggested that there may be some continuation of the wrapper and the unique reference number. I realise that this provision is disappointing for some noble Lords and for others outside this House, but I believe that it is necessary and I hope that, having had a full discussion, the noble Lord, Lord Davies of Oldham, will feel able to withdraw his amendment.