Child Trust Funds

Debate between Danny Kruger and Julie Elliott

Tuesday 19th March 2024 Westminster Hall

[Julie Elliott (in the Chair)]

The debate may now continue until 6.15 pm. I call Danny Kruger to resume his speech.

[Danny Kruger]

Thank you very much, Ms Elliott—I shall resume, rather than start again. I was saying that the child trust fund has its roots in a very good British tradition: the principle of asset-based welfare. In the 1990s, there was a tussle about the approach to public services. On the one hand, there was what we have come to call new public management, which was about centralised and bureaucratic quasi-market systems based on individual entitlements and comprehensive services. On the other, there was asset-based welfare, which was about putting capital into families and supporting communities to develop their own collective responses to social challenges.

In the new Labour years, the new public management model won out, with the great and noble exception of the child trust fund, which is such a brilliant innovation. It is such an important principle that people should be trusted to manage wealth and to sustain their families directly. I regret that, in 2010, when the coalition Government came in, the child trust fund was abandoned —I was going to have a pop at the Liberal Democrats, who I am sure were responsible for scrapping it, but let us just blame George Osborne, because we can all unite on that. Junior ISAs were established instead, and that is also a very good principle.

I want to echo the points that were eloquently made by my right hon. Friend the Member for Horsham and by the right hon. Member for Kingston and Surbiton about the real injustice that families now endure. Back in the days when the child trust fund was created, not enough consideration was given to children without mental capacity to access and manage their own finances upon becoming adults. Something very wrong was done without anybody intending it and without it being properly thought through. I will not repeat the points made by my right hon. Friend, but we have a huge obligation to right that injustice.

It is worth pointing out that we have not just tens of thousands of young people locked out of money that is rightfully theirs and without the money or incentive to pursue a Court of Protection case to unlock it. There is also a significant disincentive to open a junior ISA for parents with a disabled child who are thinking about the long-term future and whether it will be possible to access that money. So we are inhibiting the principle of saving altogether.

The right hon. Member for Kingston and Surbiton and my right hon. Friend the Member for Horsham made very good suggestions about a one-off order solution—I absolutely echo the case made there—and also about the DWP appointee scheme. The fact that we do that for benefits—as we have heard, those often account for much greater sums than the child trust fund—means that we should extend it. I also agree with the right hon. Member for Kingston and Surbiton about relieving the pressure on the Court of Protection.

The principle of child trust funds is such a good and important one in terms of the welfare model that we should have. The injustice that we have at the moment—the complexity of the system and the fact that there are so many dormant accounts—does not apply just to the families who know about the money that belongs to their disabled children and who want to access it; many millions of young people do not know that they have the right to this money—that it is, in fact, rightfully theirs. I understand that about 6 million young people have accounts, worth around £2,000 each, that they are unaware of, and it is estimated that around 1 million of those young people will come from deprived circumstances. What an enormous injustice it is that all that money is sitting there in Government accounts that they are not able to access! This has been described as malign neglect; it will not be deliberate—nobody is actively trying to prevent young people from accessing money that is rightfully theirs—but, nevertheless, for reasons we have heard about, disabled children and young people more widely are not being given access to money that is rightfully theirs.

I echo the point made by campaigners, including Gavin Oldham from the Share Foundation, about having a default withdrawal policy whereby the system knows the bank details of young people who are registered with HMRC. I understand that about 60% of young people with child trust fund accounts that they have not yet accessed could simply be given the money. That should happen; there would need to be communications and an information campaign around that, but it is the right thing to do, not least because it would stop the outrage of companies charging a 25% fee for the benefit of informing young people of the fact that they have this money. That, I think, is the future model.

As a country, we should be proud of the principle of child trust funds. A lot of people are increasingly thinking that we need to develop approaches around asset-based welfare. I noticed that David Willetts, a former colleague of ours, is proposing something similar—a capital sum granted to young people at coming of age—and Gavin Oldham has suggested that inheritance tax receipts should be used to invest in child trust funds for the future. I think that this is an old idea whose time has come, and I hope we can fix the immediate problems we have and then think more broadly about how to extend this model more widely.