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The Economic Secretary to the Treasury (John Glen)
It is a pleasure to serve under your chairmanship, Sir Christopher. I congratulate the hon. Member for Bishop Auckland (Helen Goodman) on securing this debate; I recognise that she has taken a keen interest in the issue and has been a doughty campaigner on matters of childcare and child poverty, following her 11 months as a Minister in the last Labour Government. I also acknowledge and will try to address the points made by other hon. Members.
The Government share the commitment of hon. Members of all parties to supporting people to save at every stage of life, irrespective of income or background. Financial inclusion is one of my key priorities as Economic Secretary, and in the past year I have met many organisations and experts in the field. I strongly believe that learning financial skills at a young age equips young people to make better decisions when they are older, so I am pleased to have this opportunity to set out the Government’s view.
The Government introduced junior individual savings accounts in place of child trust funds in November 2011, providing continued tax incentives to encourage families to put money away for their children’s future. Under legislation introduced in 2015, existing child trust fund accounts can be transferred into a junior ISA, providing families with the flexibility to choose the right option for their child. The Government also sought to make specific provision for children in care; as the hon. Lady pointed out, we contracted the Share Foundation to work with local authorities to open a junior ISA account on behalf of looked-after children.
The Government currently pay £200 into the accounts of children who have been in care for at least one year. The Department for Education has provided the Share Foundation with funding totalling £531,624 for that administration, and 120,000 payments of £200 have been made to children in care since 2012. We want those children to leave care with money to their name and the means to continue saving as they become independent. I should stress that junior ISAs are just one element of our work to promote financial education among young people. We want all children to enter the world of work understanding the importance of budgeting and saving, so financial literacy is now taught as part of the citizenship curriculum for 11 to 16-year-olds.
Let me turn to the so-called lost child trust funds, which were the core of the hon. Lady’s speech. There are many complex and overlapping reasons for the lack of engagement, but the Government are working with industry to actively seek holders of the accounts. Child trust fund providers are required to send regular statements to the child’s last known address and are taking steps to trace those who have moved. They have a statutory obligation to send such statements on the child’s seventh, 10th and 15th birthday, but in line with Financial Conduct Authority guidance, most do so annually.
The national insurance notification letter that HMRC sends to all 16-year-olds has recently been amended to include details about how child trust funds can be located; the hon. Lady referred to the size and colour of the font used, which is clearly a matter that I can take on board and examine. I also draw hon. Members’ attention to HMRC’s online tracing tool, which is available via gov.uk. Of course, people can still contact HMRC by telephone or post if they so choose.
Chris Ruane
May I put to the Minister the same question that I put to my hon. Friend the Member for Bishop Auckland (Helen Goodman)? The Share Foundation was able to give her statistics on the distribution among socioeconomic groups, but when I tabled questions to the Treasury asking for exactly the same information, it was not available. When I asked for estimates by nation and region, that information was not available. When I asked what additional resources had been allocated to assist in locating child trust fund accounts, that information was not available either. Can the Minister supply it today?
John Glen
I am grateful for that question about the regional and income breakdown of the distribution of child trust funds. Such information is published by HMRC and discriminates by region and county and by whether additional contributions were made; no income distribution data is collected by HMRC. I am happy to look into the matter further; if I can give the hon. Gentleman any more information, I will write to him.
Looking to the future, approximately 6 million child trust funds have not yet been transferred to junior ISAs. The first of those accounts will mature next September, and a further 55,000 will mature every month thereafter until 2029. What young people choose to do with their money is ultimately a matter for them, but we want them to engage in the process so that they can make the best decision for their individual circumstances.
Helen Goodman
As I have explained to the Minister, the problem is that people cannot use the Government website to access their accounts if they do not have a payslip, a P60 or a passport. Will the Minister address that point? Hundreds of thousands of young people will be in that situation.
John Glen
The key question is how an individual child knows what they have. The hon. Lady’s allegation is that this money is lost, but it is not lost; it is just that the individuals have not come to the point at which they can engage with it, which will happen at age 16 when they get a letter with their national insurance number. At 16, they are allowed to make decisions about their investment choices for that fund, and at 18 they can access it. They get the letter, along with their national insurance information, at 16, the age when they can start making individual decisions about that money. I think it has been suggested that the Share Foundation should interrogate data from the Department for Work and Pensions, cross-reference it with HMRC’s, and somehow write to these individuals—
Tonia Antoniazzi
What plans does the Minister have to encourage eligible parents, and children when they turn 16, to access this money? Is it not the responsibility of the Government to do some kind of public awareness campaign to say, “Hey, look—here’s your investment that the Government made for you. This is how you access it.” Let us make this a can-do exercise.
John Glen
The key point is that children have access to this money when they are 18, but can influence decisions about it from the age of 16, when they are paying tax and have a national insurance number. They will gain that access mechanism when they secure their national insurance number. The hon. Member for Bishop Auckland made a point about how this issue should be depicted on the form when 16-year-olds get their NI number, but that number provides the key to unlock awareness of, and access to, the fund that has been invested for them.
Helen Goodman
I do not like to denigrate my former profession, but I do not think the Minister has been very well briefed. According to the Share Foundation, the lost accounts of the most wealthy number 54,000, the middle income 560,000, and the poorest 444,000. Those are not families in which the child is already 16 to 18; it includes all families. It means that the addressee has gone away. We do not know whether the address we have got is the right address for that group of people.
John Glen
The point I am making is that all individuals, no matter what their background is, will gain access to the funds at the point when they can gain their national insurance number, by reference to the letter that has been provided. I have had extensive conversations with my officials, and I note the hon. Lady’s reference to bureaucrats. She worked for over 20 years at the Treasury—I have the highest regard for it and the accuracy of the material it has given me.
No funds or accounts have been lost. All child trust funds have been managed by child trust fund providers—either by the original provider with which the account was set up, or by a subsequent provider to which the funds have been transferred. There are 69 providers currently managing child trust funds, and the Share Foundation’s analysis appears to be based on accounts held with just one provider: the Share Centre, which represents only 1.5% of the number of accounts. The hon. Lady might want to contradict that by extrapolating the data to all of them, but the Government are working together with the industry to encourage child trust fund holders to re-engage with their accounts.
As I said, we have developed an online tracing mechanism and recently amended the national insurance notification letter to 16-year-olds to include a reference to child trust funds. That happened in January in order to take into account the points raised. Any account holders who are unable to retrieve their account details online are encouraged to contact HMRC directly.
Helen Goodman
I have just explained to the Minister that to get through to the website, people must have other documents that—by definition—16-year-olds do not and cannot have. The system is not working. The Minister needs to rethink how the website works!
John Glen
I do not think that the hon. Lady’s raising her voice in an aggressive manner is going to help anyone. I have just set out the Government’s position and explained the detail of the provision. The hon. Lady has extrapolated some figures from one piece of analysis by one of the providers, which is not a reliable way of carrying on. I have told her about the action we took in January.
The issue is not just about the online portal, but about being able to call up HMRC. Last year’s Budget included a commitment to consult on draft regulations that will ensure that investments currently held in child trust fund accounts can retain their tax-free status after maturity. The consultation will take place later this spring, when the Government will lay regulations before the House, well in advance of the first accounts maturing in September 2020.
In summary, both junior ISAs and child trust funds allow parents and guardians to save on behalf of their children, tax free. People have the option to convert their child trust fund into a junior ISA, and we are working with providers to reunite dormant accounts with their intended owners. However, all remaining child trust funds will continue to enjoy tax-free status, even after they mature. The amount that young people can save in child trust funds and junior ISAs will increase by the rate of inflation in April—it is currently £4,260 a year.
Chris Ruane
I agree with my hon. Friend the Member for Bishop Auckland that the system is not working. As a way out, would the Minister consider meeting people who have sufficient knowledge—I would include my hon. Friend—or perhaps citizens advice bureaux, the Share Foundation and a panel of parents, so that some answers can be given to the questions that have been raised?
John Glen
On behalf of the Under-Secretary of State for Education, my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi), who is the Minister responsible for this area and is currently before a Select Committee, I would be very happy to offer a meeting with hon. Members to discuss this matter further. It is his responsibility, and I am sure he would be very happy to attend.
We have made efforts to provide young people with savings to draw on as they reach adulthood, and we hope this encourages further saving at every stage of life. The points made by the hon. Member for Bishop Auckland on access have been comprehensively addressed by the Government’s sending a letter to 16-year-olds.
Helen Goodman
Will the Minister take on board my suggestion of writing to the recipient of the child benefit when the person turns 18? The Government writes to every mother across the entire nation, and that would be an opportunity to catch them in the net.
John Glen
The key point here is: when does somebody have access to make investment decisions as a young person? It is when they turn 16, and then they can access it when they are 18. Trying to overlap the letter with the mother when actually it is about the beneficiary, who is the child, is not the route to go down.