Child Trust Funds

Debate between Mike Freer and Ed Davey

Tuesday 19th March 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Justice (Mike Freer)]

It is a pleasure to serve under your chairmanship, Ms Elliott. I thank my right hon. Friend the Member for Horsham (Sir Jeremy Quin) for securing the debate and continuing the conversation we have had for some time. I was pleased to meet him and his constituent Mr Turner last May to discuss the issue, and I welcome the ongoing debate that we are having.

I will not tiptoe down memory lane, as colleagues have —I am not sure that revisiting the coalition Governments of 2010 onwards is particularly helpful to today’s debate. What I want to do and what is important—and I am sorry if it is dry—is lay out the legal framework that is there is to protect vulnerable people. I understand clearly that the actions of the vast majority of parents are well intentioned, and that they act with great honour and kindness looking after their child or young adult. However, my job is also to protect vulnerable people from any form of abuse, and that weighs heavily on any reforms that we take forward. I appreciate that people will disagree vehemently with me, but I have to take into account the fact that not every parent would act with the best of intentions when accessing the funds.

It is a well-established common-law principle that an adult must obtain proper legal authority to access or manage the finances or property of another adult. That includes, for the purpose of today’s debate, a matured child trust fund of a young adult. People are understandably unaware of that legal principle, and it may be surprising to parents and carers who have been heavily involved in decision making for their young person prior to their turning 18. I want to iterate the steps that we have already taken to try to improve the process, particularly as regards awareness of what steps need to be taken as the young person reaches the age of 18.

[Ed Davey]

Before the Minister talks about reforms that have been made, can I bring him back to the point of principle that he outlined at the beginning of his remarks? I do not think anyone disagrees that there is an important principle, but there is equally a principle of proportionality that I mentioned in my speech. Can the Minister address that point? Where does proportionality arise in his thinking about the principles involved?

[Mike Freer]

I have to say to the right hon. Gentleman that I am happy to have an ongoing conversation. In fact, this is the first time we have discussed the matter face to face since I took on my portfolio. Proportionality is a valid point, but what is the level of risk that the right hon. Gentleman is willing to take? It will be different from the one that I or the Government are prepared to take. The right hon. Gentleman or anybody in this room may be prepared to say that 10, 20, 100 or 1,000 young people could have their money accessed inappropriately. That is a proportionate risk that they are willing to take. My view is that I want to minimise that risk and that proportionality is not easily measured.

I am not a lawyer. I look to my right hon. Friend the Member for Horsham and my legal friends to say that there may be a legal definition of proportionality. However, the definition of proportionality for those who are making decisions against those who are asking for change may be different. I am willing to see if we can bridge the gap, but my view is that I want to ensure that we can both improve access and that protections remain in place so that those who may not have the best interests of the young adults in mind do not get access to funds with total liberty.

[Ed Davey]

I am grateful to the Minister for that answer. It was direct and to the point, and he has given way again, which is generous.

When we look at the risk, we have evidence from the industry, which has looked at the case and many firms and funders have said that they are prepared to take on the risk themselves. Even though the Government are behind it, because the risk and the amount of money are so small, the firms have taken on that risk themselves. Is that not a lesson that the Minister should dwell on? If the MOJ is not prepared to act on that, would he at least go and talk to his colleagues at the Treasury and see if they can make a statement about the way in which the financial services could take on that risk and how the Government would support that?

[Mike Freer]

I am always happy to discuss with any provider and certainly the provider I have spoken to. No provider has beaten a path to my door saying, “We think you have got it wrong and our risk assessment is right.” Any organisation is entitled to make their own risk assessment and accept the consequences if they get it wrong. That is their decision. As for my risk assessments, perhaps I am being over-cautious. I am willing to be challenged on that and I appreciate that people have a different view, but I want to ensure that I take the least risk regarding vulnerable adults.

I will talk briefly in the time left about the work we have done with the Investing and Saving Alliance to try to improve accessibility and knowledge. Given the time, I will have to skip over the part of my speech about the legal framework of the Mental Capacity Act 2005. I think everyone in the room is probably aware of the methodology of applying for the deputyship that gives people access or the ability to act on other people’s behalf. I will not go through that in any great depth.

We have heard that the court process was cumbersome, which is why we looked at how we could change that. We consulted on what kind of different system we could put in place, but there was not a consistent view from the consultation on how we should reform access to the funds. In fact, if we go into the consultation, many people wanted to add safeguards to a new form of access that actually made the system even more cumbersome than the one we were trying to reform. That was a difficulty, as we did not get a common view on what checks and balances needed to be in place. We talked not just to parents, but to charitable organisations, the legal and finance sectors, groups representing the elderly and so on, and we heard that it was too complex. The big message that came out was that people were not really aware of what they had to do or when they had to do it.

I think that the first ask from my right hon. Friend the Member for Horsham was whether we would extend appointeeships to cover child trust funds. We are working with the Department for Work and Pensions to extend the availability of information. I am more than willing to go back to the DWP and talk about whether its process is suitable for child trust funds. It is a very different process: it is about accessing regular payments rather than lump sums, so there is a different quantum at risk. It would take primary legislation to access the DWP-type processes—we double-checked that today. It is not a quick fix, but it is certainly one that I am more than happy to go back and have another look at.

I want to ensure that we are streamlining the processes. Can we take the paper out? Can we use more digital processes? We have seen that the time has reduced from 24 weeks to 12 weeks. We will continue to liaise with the President of the Court of Protection to monitor performance and see what more can be done.

A key issue is that people often do not know what they have to do until the child turns 18, and then they are locked out. We have done two things; I apologise if this sounds a little disjointed. I sat down with TISA, the major provider of child trust funds, and we agreed that as part of its normal maturity mailing, it will include advice and information about how to access and use the Court of Protection to get the relevant legal powers in place. We are taking early steps to educate people as to what they need to do before the person turns 18. That comes alongside the toolkit, which, as hon. Members have noted, provides practical guidance on how to access and navigate the legal process.

My right hon. Friend’s second ask was about making people aware of how to find lost funds. We are doing more work to provide information. People can use the “Find my child trust fund” service on gov.uk. We can continue to do more to raise awareness of that.