Child Trust Fund (Looked-after Children)

Justine Greening Excerpts

Tuesday 19th October 2010 Westminster Hall

[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure to serve under your chairmanship for the first time, Mr Hollobone, and it is nice to see you in your place today. I start by congratulating the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) on securing this debate. As she points out, it is an important topic. She is right to say that perhaps more than many other communities in our country, looked-after children need people who will stand up and speak on their behalf about some of the challenges that they and their families face.

The context for today’s debate is unfortunate—it is the day before tomorrow’s spending review. I suppose that that is either good or bad, depending on how one looks at it. I will respond to the hon. Lady in detail, and I will also try to address the important questions that she has raised. In the time available, I will set out the overall context of the changes and explain why they are taking place. I will go on to talk in more detail about the specific issues that she raised regarding looked-after children. The devolved Assemblies are an added aspect. As the hon. Lady said, responsibility for the delivery of services and support for looked-after children lies with the Scottish Government.

I agree that looked-after children face greater challenges than other children, and that they need and deserve greater support. In England, we are looking at ways to improve that support, alongside other measures taken in the spending review. I understand the hon. Lady’s disappointment at the changes that we have to make to the child trust fund. Unfortunately, those changes are necessary. This week in particular, with the spending review happening tomorrow, hon. Members will be aware of the unprecedented budget deficit that the Government inherited. That is not a position that we wanted to be in, but it is a grave situation.

At the moment, we currently borrow £1 of every £4 that we spend. The hon. Lady mentioned financial literacy, and that is a broader issue that we as the UK Government are trying to tackle for our country as a whole. Because of the problems that we face with the deficit, our level of debt and the interest that we have to pay, the amount left for public service support is being squeezed. It is simply not affordable to spend over £0.5 billion a year on the child trust fund. The children concerned cannot use that money for 18 years, and we cannot afford to spend it when we have limited resources that are under pressure to provide support and services for people now, including looked-after children. As I said, I will come on to the more specific issues, but it is important to drill down into the wider context for those who may read the debate later.

As the hon. Lady knows, we have already reduced Government payments into child trust funds, and we have introduced a Bill to end eligibility to child trust funds for children born from next January onwards. In other words, most women who were pregnant when we made our initial announcement will have access to the child trust fund; the Bill will affect children born from next January onwards.

I confirm that the top-up payments to the child trust funds of looked-after children will stop. Those changes will save £320 million this year, and over £500 million a year in the future. That is £0.5 billion that we do not have to find through spending cuts—perhaps in important areas such as education or children’s social services—increasing taxes further, or borrowing, which would mean that our deficit was higher and that even more taxpayers’ money was going to fund debt interest instead of public services.

We are talking about a legacy. The hon. Lady rightly made the point about looking ahead, but we are concerned about the legacy that all children will inherit if we do not tackle the debt that we face now and the deficit; the country’s level of debt would be eye watering, even compared with today. During this Parliament, spending on our debt interest could rise from £43 billion—a huge figure compared with what we spend on transport, prisons or justice, for example—to £60 billion. That is a rise of £17 billion over the next few years and shows what a challenge we face. We must try to work together to balance our priorities. If we do not address the debt, it will only increase further and put even more pressure on the vital public services that we want to support.

[Cathy Jamieson]

I appreciate that the Minister is trying to be helpful and I look forward to what she has to say, particularly on support for looked-after children, but could she answer the question that I raised? What assessment was made of the effectiveness of the outcomes of the child trust fund for looked-after children before it was decided to scrap this particular scheme?

[Justine Greening]

The hon. Lady will be aware that a key aspect of the emergency Budget was to examine the distributional analysis of how people would be affected, but also to consider key issues in relation to children, such as child poverty. We were very careful to consider those issues. Indeed, given the problem that we were having to start to solve, the fact that we were able to introduce an emergency Budget that still managed to see child poverty not rising is a measure not only, we hope, of its effectiveness, but of our desire as a Government to see that whole issue as important. We are trying to balance protecting things today with, as the hon. Lady points out, the need to look more long term.

I can reassure the hon. Lady that my hon. Friend the Financial Secretary to the Treasury is examining ways in which we can encourage saving and children’s saving. We recognise that that is an issue and my hon. Friend is considering it. He is very interested on a personal level, and has been for many years, in how we can improve financial literacy—the other key issue that the hon. Lady raised—and ensure that people take good decisions.

The hon. Lady said that the Scottish Government had not always ensured that money got to where it was meant to go. She is right to raise that as a concern. In England and in Scotland, local authorities have a statutory obligation to report to Her Majesty’s Revenue and Customs all children who come into their care who are of child trust fund age, precisely so that HMRC can ensure that all children who were due to get a child trust fund got an account and received the payments to which they were entitled at birth and at age seven. In fact, they are meant to report monthly to HMRC so that that can be followed up. There are very clear guidelines from the Department for Education requiring local authorities to make those payments, so the hon. Lady is right to raise her concerns in relation to the Scottish Government. I shall take this opportunity to say to her what she has probably already said to the Scottish Government. As a devolved Administration, they, too, can take decisions about whether they want to see this area as a priority for children in Scotland and for looked-after children—the group about which the hon. Lady is particularly concerned.

The hon. Lady talked about keeping the top-ups for looked-after children in place, despite the difficult decisions that we are having to take about child trust funds. We examined some of the challenges in relation to doing that. We recognise that looked-after children need to have additional support, and certainly in England we will be looking at how we can ensure that that happens. Ultimately, however, we just did not believe that continuing to pay the £100 top-ups to looked-after children would be the most effective way of providing that support, given the broader pressures that we faced in relation to public services and ensuring that we tackled the deficit. That is why we took the difficult decision that the top-ups would be stopped in due course.

One issue that we examined was that when local authorities make those £100 payments, it costs them £122. Part of the challenge that we face now is that that extra £22 spent on administration would be much better put into front-line services. When we considered that, it just did not make sense to continue those £100 payments, especially given the impact that that would have had on the broader budget and the fact that the £100 payments would be locked away until the children reached 18. They were not going to get the benefit from them for many years, and our concern was that we want them to reach that age in a country that is not paying hand over fist for debt interest and that does have money to pump into public services in a sustainable way. That was not the situation that we found ourselves in when we came into office.

[Cathy Jamieson]

I absolutely understand the issue about value for money and ensuring efficiency. It certainly does not seem to make sense that it costs £122 to make a payment of £100. However, does the Minister agree that looked-after children do not have a parent putting money aside for the future or putting money literally in trust for the future, as we would all do for our kids, so that when they get to the age of 18, they have some money, however small the amount, and that someone has to take responsibility for that? In those circumstances, is there anything that she can say today about ensuring that young people, when they leave care at the age of 18 to go into further or higher education or into the world of work, will have some money behind them to allow them to move on into adult life?

[Justine Greening]

I talked briefly about the fact that we recognise that financial literacy and encouraging saving for children are important. She knows that we have a broader problem with saving in Britain. The savings ratio had really fallen. It was not just the Government who had unsustainable finances; many households did as well. As I said, we are considering how we can nevertheless encourage saving and encourage children to save. Obviously, we have to work within the constraints of the public finances, but that work will explore the idea of allowing parents potentially to open a tax-free account for children born after child trust fund eligibility ends. I am sure that, as part of that, we would look at the group of looked-after children, in the same way that they were part of the child trust fund scheme. For most children in Britain, the account was triggered and opened by the parents, but for looked-after children, it was the local authority that took that approach.

Any such account would not have Government contributions going into it, but potentially could have some of the other features of child trust funds. Clearly, however, if we go down that road, we need to consider the design of any account carefully. It is clear that it would not be exactly the same as the child trust fund. However, I can reassure the hon. Lady that we are trying to find our way through the problems that we face today, which are grave and must be tackled, while at the same time ensuring that on these important issues, for the longer term, we still do what we can to support these children and address the issues.

Time is moving on. I shall try to ensure that I have covered the other issues that the hon. Lady raised. She talks about social mobility and she is absolutely right. I passionately believe in social mobility. She is right to talk about ensuring that we support looked-after children and that particularly when they leave care and face all the challenges that she referred to, they get support. Certainly in England, we are very keen to consider the overall package of support for these children, and I know that my colleagues in the Department for Education are doing that.

I am certain, given the hon. Lady’s clear interest in the issue, that she will follow it up in the Scottish Parliament. Indeed, she has a long track record not just of expressing an interest, but of being involved in direct policy making in this area. It is great that that experience has been brought into the UK Parliament.

I can see time ticking on. To conclude, I again congratulate the hon. Lady on securing the debate and on her eloquent and passionate description of the needs of looked-after children. As I have explained, I agree that these children, alongside other disadvantaged children, need more support than many children. Only last week, the Deputy Prime Minister was talking about the fairness premium to ensure that we can target and help those children growing up who perhaps need the most support to make sure that they can get the opportunities that many children in this country have, but too many do not.

We are passionate about tackling disadvantage, including for looked-after children, and we want to provide that support, but as a Government—a coalition Government—we just do not think that the child trust fund is the best way to do that. Those children, including looked-after children, need support now, rather than having it locked away until they are 18. It would not have been the best use of our limited money, either for looked-after children or for others—

[Mr Philip Hollobone (in the Chair)]

Order. I thank both hon. Ladies for taking part in the debate. We now move on to the next debate.