Child Trust Funds (Amendment No. 3) Regulations 2010
Debate between Lord Liddle and Lord Naseby
Lord Naseby
My Lords, I declare an interest. I contribute to the child trust funds for both my granddaughters, Ciara and Ella. In a sense, I should declare an interest in that I am the only one in the Chamber at the moment who was involved in the creation of the child trust fund when it was originally voiced by one of the think tanks, IPPR. Some funds were transferred from the Children’s Mutual, of which I had the privilege of being the chairman at that time, so I was in at the beginning. I state now, as I stated then, that I had reservations about the supplementary contributions at seven and 11.
The scheme has worked, in the sense that 6 million children have benefited from it so far. About a third of the trust funds have been topped up by various family members and that figure is slowly increasing. Some would say that a third of young people saving anything significant is not a huge success, but it is certainly a very good start. It is certainly better than anything that had happened in any previous scheme from any other Government, so when I first heard the news I had to think hard about this whole situation.
I suppose that as an economist I am conscious of the economic situation that my noble friend on the Front Bench has been saddled with. I am not the least bit surprised that he has looked at every conceivable large sum sitting on the books—and £500 million is a large sum in anybody’s counting house. My noble friend will correct me if I am wrong, but I think that the figure is £525 million, of which £5 million is the cost of administration and £520 million is the figure for the amount given out in benefit.
I recognise that any Government facing the situation that our Government face at this time would need to claw back a significant sum from any scheme, whether for children or anyone else. However, I want to make a plea. I welcome the news that my noble friend announced from the Dispatch Box that there is to be a meeting with the providers later this week or early next week. That is a hopeful sign and could be beneficial.
Whether or not this particular scheme goes forward, the kernel of the scheme is the unique number that is issued by the Government to every child in the country. I have calculated the cost of issuing those unique numbers to be about £2 million. Whether or not the scheme continues and whether or not there is to be a mark 2 version—there was an inference on that from my noble friend on the Front Bench—without that unique number it is not possible to take it forward. My plea to him is to recognise that that is the kernel of the scheme. I am sorry to take issue with my noble friend, who has just joined us, but I think that what he said was wrong. The unique number is absolutely crucial. If that goes, the scheme is dead and I would personally regret that.
Lord Liddle
My Lords, in rising to support the amendment moved by the noble Lord, Lord Davies, I make one simple point. I accept that the country faces grave financial difficulties and that there will be a need for public spending cuts. I accept that the child trust fund scheme may need revision. However, what the Government are proposing is extremely drastic. Of all cuts, it is not the right cut to make. I will explain why.
The child trust fund attempts to build capital that people, especially the most vulnerable and poorest in our society, can spend when they reach adulthood. There is far greater inequality of wealth than of income and there is a particularly great inequality of what an economist would call liquid wealth. Inequalities of wealth have narrowed in recent years largely as a result of the expansion of home ownership, which has spread over large sections of the population. However, there is a massive inequality in how much cash in savings people have for meeting essential needs.
This morning, I looked at the figures that the Institute for Fiscal Studies—a noted body—quotes in its latest research on the subject. The latest figures, which were for 2005, show that the median family in Britain has cash savings that it can access of the massive sum of £1,100. For the family at the 75th point of the distribution, the figure is £16,000 and, for the family at the 90th point of the distribution, it is £60,000. However, families at the bottom, below the median, have virtually no cash or liquid savings of any kind.
The child trust fund was a bold and radical attempt to give children from poor families in particular, through targeting extra resources on those families, some stake, so that, when those children came to maturity, they would have some funds that they could access. This Government are proposing to take that away, which is why I support the amendment moved by the noble Lord, Lord Davies.