HC Deb 03 February 2004 vol 417 cc676-83

  1. 'For the purpose of any contact entered into in respect of a child trust fund, the age of majority shall be 16.
  2. The Family Law Reform Act 1969 (c. 46) is amended as follows.
  3. After section 1 insert—

"1A Reduction of age of majority in respect of child trust funds

  1. For the purposes of any matter specified in subsection (2) which relates to a contract entered into in respect of a child trust fund, a person shall attain full age on attaining the age of sixteen
  2. Those matters are—
    1. any rule of law, and
    2. the construction (in the absence of a definition or of any indication of a contrary intention) of the expressions listed in section 1(2) and similar expressions in—
      1. any statutory provision, whether passed or made before, on or after the date on which this section comes into force; and
      2. any deed, will or other instrument of whatever nature (not being a statutory provision) made on or after that date.
  3. Subsections (6) and (7) of section 1 shall apply to the provisions of this section as they apply to the provisions of that section.
  4. In this section 'child trust fund' has the meaning given by section 1(2) of the Child Trust Funds Act 2004."

In section 28(4) (extent), after paragraph (a) insert— (aa) section 1A extends to Northern Ireland;".'.—[Mr. George Osborne.]

Brought up, and read the First time.

Mr. George Osborne

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Alan Haselhurst)

With this it will be convenient to discuss the following: New clause 5—Designation of responsible person by young parents—

  1. 'This section applies to a person who has parental responsibility in relation to a child who is under the age of 18 or, in Scotland, 16 (person A).
  2. Person A may designate another person (person B) who is over the age of 17 or, in Scotland, 15 as the responsible person in relation to the child for whom person A has parental responsibility.
  3. Person B must inform the Inland Revenue that he has been designated as the responsible person in respect of the child.
  4. Regulations may prescribe—
    1. the required method of designation under subsection (2),
    2. any requirements relating to person B informing the Inland Revenue under subsection (3), and
    3. the circumstances in which person B shall cease to act as responsible person on or after the day on which person A reaches the age of 18 or, in Scotland, 16.'.
New clause 11—Early withdrawal by young person in full-time employment—
  1. If this section applies to a child, that child may withdraw funds from his account in accordance with the provisions of subsections (4) and (5).
  2. This section applies to a child if—
    1. a child trust fund is held by the child,
    2. the child is over the age of 15, and
    3. the child is in full-time employment.
  3. Regulations may prescribe—
    1. the meaning of "full-time employment" for the purposes of this section, and
    2. the manner in which proof of full-time employment is to be provided for the account provider.
  4. A child to whom this section applies may apply to withdraw amounts from the fund, including the whole amount of the fund.
  5. On receipt of the proof of full-time employment prescribed by regulations under subsection (3)(b) and an application, the account provider must—
    1. release the amounts requested to be withdrawn, and
    2. inform the Inland Revenue in accordance with regulations.'
Amendment No. 76, in page 2, line 44 [Clause 3], leave out 'as' and insert 'in accordance with the provisions of section [early withdrawal by young person in full-time employment] or as otherwise'. Government amendments Nos. 33 and 34.

Amendment No. 5, in page 3, line 3 [Clause 3], after second 'person', insert 'so designated in accordance with the provisions of section [designation of responsible person by young parents] or a person'.

Amendment No. 6, in page 3, line 8 [Clause 3], leave out '18, or in Scotland,'.

Amendment No. 7, in page 3, line 9 [Clause 3], leave out', in Scotland,'.

Government amendment No. 35.

Amendment No. 9, in page 3, line 33 [Clause 5], leave out from 'or' to 'to' in line 34 and insert 'where subsection (2A) applies'.

Amendment No. 10, in page 3, line 34 [Clause 5], at end insert '(2A) This subsection applies in the case of a child—

  1. who is such an eligible child because of section 2(3), or
    2. 678
  2. in respect of whom a person has informed the Inland Revenue that he is the responsible person in accordance with the provisions of section [designation of responsible person by young parents](3).'.
Government amendments Nos. 40 and 42.

Amendment No. 77, in page 10, line 39 [Clause 20], after '3(4)(d)', insert 'or by section [early withdrawal by young person in full-time employment]'.

Government amendment No. 49.

Amendment No. 28, in page 16, line 15 [Clause 30], after 'Act', insert 'except section [reduction of age of majority in respect of child trust funds]'.

Amendment No. 29, in page 16, line 16 [Clause 30], at end insert— '(2) Section [reduction of age of majority in respect of child trust funds] extends to Northern Ireland, but does not extend to Scotland.'.

Mr. Osborne

I wish to speak to new clauses 4 and 5 and their consequential amendments, and I am sure that the hon. Member for Yeovil (Mr. Laws) will speak to new clause 11.

New clause 4 would give children aged 16 and 17 the power to manage their own child trust fund accounts, although it would not give them the power to make withdrawals from them. In effect, it would extend to children aged 16 and 17 in England, Wales and Northern Ireland the same rights that the Bill gives to 16 and 17-year-olds in Scotland, owing to a quirk of Scottish law.

The Bill's current drafting gives rise to all sorts of anomalies that we discussed in Committee. If people lived just over the border in England and opened a child trust fund account in a local village bank in Scotland, could the child manage it at the age of 16 or 18? If I walked into a branch of the Royal Bank of Scotland and opened an account for my daughter, could she manage that at the age of 16 or 18? If people born in Edinburgh moved to London on their 16th birthday—or at any other point—how would that affect the management of their child trust funds? When I read the Bill, I thought that the provisions would be a recipe for chaos and administrative complexity and that the situation would force providers to keep track of their Scottish and English customers.

Mr. Weir

I am interested in what the hon. Gentleman is saying, but is it not something of a red herring? The situation already exists because the age of majority in Scotland has been 16 for as long as anyone can remember. Financial institutions already face the problem with existing policies and investments, but it does not seem to have caused a difficulty until now.

Mr. Osborne

The hon. Gentleman makes a fair point, but the Government have caved in by accepting my proposal, so they obviously think that there is merit in what I am suggesting.

I repeat a point that I made in Committee that goes beyond the technical aspects of the situation. It would be wrong to deprive 16 and 17-year-olds in England, Wales and Northern Ireland of the chance to manage their accounts. Surely one of the objectives of child trust funds is to improve financial education for our children, and one of the best ways to do that would be to involve them directly in the management of their own accounts—that could be tied in with school lessons.

The potential for damage to accounts and poor investment would be limited. For a start, most of the accounts will be lifestyle accounts, so risk will be minimised by the time that children reach 16. Indeed, given that children will have attended classes at school in which they will have discussed the accounts, they may well be better informed and able to make better choices than their parents.

The Minister seemed convinced by the force of our arguments in Committee, but she was worried that we would undermine the foundations of contract law in the United Kingdom—that was certainly not my intention.

She said in Committee: this is not to do with anomalies between the general law in England and that in Scotland, but with whether, in England, we want children under 18—perhaps those over 16—to have some say in the management of their accounts. I put it to the Committee that there are real difficulties in changing contract law on that point. I certainly undertake to consider whether it is a simple issue, but I suspect that it is much more complicated than hon. Members appreciate. If the hon. Gentleman wishes, I shall come back to him on Report to give an update on the complexities of changing contract law."— [Official Report, Standing Committee A, 6 January 2004; c. 74.] Thankfully, unless I have misunderstood, it seems to be not all that complex, because Government amendments Nos. 34 and 35 achieve exactly what I wanted and urged, and with considerably greater elegance than my amendment. Indeed, amendment No. 35 is a model of simplicity. It says: Where a contract is entered into by or on behalf of a child who is 16 or over in connection with a child trust fund—

  1. held by the child, or
  2. held by another child in relation to whom the child has parental responsibility,
the contract has effect as if the child had been 18 or over when it was entered into. It is extraordinary how the entire basis of contract law can be changed by a single sentence saying that the situation is as it would be if the child were 18. I am delighted that the Minister has with such elegance been able to overcome that problem.

I wonder if the hon. Lady could clarify the situation of parents who are themselves 16 or 17 years old. The Bill as originally drafted had a cumbersome process by which the Inland Revenue would manage accounts for the children of 16- and 17-year-old parents. My new clause 5 was designed to allow parents under 18, or under 16 in Scotland, to designate an adult as the responsible person who could manage their child's account until the parents themselves became adult. I thought that they could designate, for example, a grandparent or another relative. It seemed sensible, and it would avoid having to involve the Inland Revenue, with all the administrative cost that that would entail.

I should be grateful if the Minister would confirm, first, that I have understood her amendments correctly and that she is giving 16 and 17-year-olds the power to manage their own accounts, and, secondly, that the effect of subsection (6)(b) of Government amendment No. 34 is that parents aged 16 and 17 will be able to manage their children's account. That deals with the thrust of my argument in both new clause 5 and new clause 4.

I have one final point on parents aged under 16. Is the Minister saying that their accounts will have to be administered by the Inland Revenue? Does she hold open the prospect of allowing a parent under the age of 16 to nominate a grandparent or other relative to manage the child's account for them, and in a sense not force the Inland Revenue to step in? It is a small point, but there are, sadly, a relatively significant number of children born to people who are under the age of 16, so the situation will arise on a weekly basis.

All in all, the Government seem to have listened to and accepted almost all the arguments that we advanced in Committee. I tabled the amendments merely to provoke a discussion; indeed, I tabled them before I had seen the Government amendments. I am delighted that the Government have listened. This was not a matter that any financial provider or institution put to me. When I was reading through the Bill, trying to dream up all kinds of amendments to keep the Committee busy, I came across it, and I am pleasantly surprised that the Government have recognised that there is a problem and that they are correcting it.

Mr. Laws

I too welcome the Government new clauses and amendments in this group.

It would have been daft if the Government had stuck to their previous position in respect of the management of accounts, so that those over the age of 16 could not manage their own accounts, particularly if the Government are saying that one of the benefits of the child trust fund account is that it is supposed to encourage people to be more financially aware and take responsibility for monetary matters. Yet we were in the ridiculous situation whereby, even at the ages of 16 and 17, people would not be able to manage their own accounts, while, even more daftly, in Scotland people could. There would have been a complete anomaly across the borders within the United Kingdom, so I am relieved that the Financial Secretary has tabled a very elegant and unbelievably simple amendment to correct the problem.

New clause 11 and the associated amendments encourage the Government to go a little further than they may be willing to go. In their own amendments, the Government have given way to the case developed by the hon. Member for Tatton (Mr. Osborne), which we supported in Committee, for allowing children aged 16 and 17 to manage their own child trust fund accounts and, we hope, for allowing parents aged 16 and 17 to manage the child trust fund accounts of their children. It would be bizarre if that were not permitted under the Bill. Nevertheless, in respect of withdrawals, individuals aged 16 and 17 are treated as though they should have no responsibility and it should be a matter entirely for parents.

When we discussed these matters previously, I reminded the Committee of the existing entitlements under the law at the age of 16. People of that age can leave education, enter full-time employment, have sex, smoke, play the national lottery, join a trade union, apply for a passport, pay tax, pay national insurance and, with parental consent, join the armed forces, get married or leave home. We know that the Government are consulting on giving the vote to young people aged 16 and over. Under those circumstances, it seems bizarre that the Government are not considering allowing young people to access their child trust fund accounts at the age of 16, especially as one of the stated objectives of the account is to assist people starting off in employment.

As the Minister knows, many young people leave school at 16 and do not go on to take A-levels or enter higher education. Many of them start their employment at 16 or 17. As the Government said earlier that they would like people to draw down their child trust fund account to provide the up-front capital for training or for the equipment that they might need in their places of work, it would be sensible to allow young people going into full-time work at 16 or 17 to draw down their child trust fund accounts.

New clause 11 would allow young people who go into full-time work at the ages of 16 and 17 to draw down their child trust fund accounts so that they can use their moneys in the way that the Government intend—to help them as they start off in employment. It is a middle way between the extreme position that young people ought to be able to manage and access their child trust fund accounts at the age of 16, and the more moderate proposal tabled by the hon. Member for Tatton and accepted by the Government that would allow young people to manage their accounts but not access them at the age of 16.

We suggest that young people who go into full-time work should be treated in a different way and be able to access their child trust fund accounts, and that the help that the Government intend should be available for people when they go into work should be available for this category of young people, who could make good use of the moneys at such an age.

Ruth Kelly

As the hon. Member for Tatton (Mr. Osborne) explained, the main purpose of new clause 4 and the connected amendments is to reduce the age at which young people can have full legal control over their child trust fund accounts from 18 to 16. In Committee, he set out a case for allowing 16 and 17-year-olds in England, Wales and Northern Ireland to manage their child trust fund accounts, as 16 and 17-year-olds in Scotland will be able to. I do not believe that this is a devolution issue. The hon. Member for Angus (Mr. Weir) made an appropriate and fair point.

This is not a problem for the Government, but I accept that it is an opportunity for us. As the hon. Members for Tatton and for Yeovil (Mr. Laws) pointed out, one aim of the child trust fund scheme is to improve people's financial education. In Committee, I accepted the argument that we should use the opportunity to consider whether children of 16 and 17 in England, Wales and Northern Ireland should also be able to manage their child trust fund accounts. The hon. Member for Tatton also argued that, following financial education classes, children of 16 and 17 could well be better placed to make informed decisions than their parents.

3.45 pm

The hon. Gentleman was clear about his intention to restrict solely to child trust funds the change in the law allowing persons aged 16 and 17 in England, Wales and Northern Ireland to enter into contracts to buy or sell equities. I am persuaded by those arguments. Further to the points that he made, I can see that if young people take a responsible role in managing their accounts, that will encourage them to make better and more considered decisions about how to use those funds when they turn 18 and gain access to them. Lowering the age of majority for the child trust fund will help very young parents, who will be able to administer their own child's account once they are 16, not 18. However, new clause 4 and the related amendments are not drafted in the best way to achieve those objectives. I think that the hon. Member for Tatton would accept that the Government amendments will better allow 16 and 17-year-olds in England, Wales and Northern Ireland to manage their child trust fund accounts by making a simpler change to the Bill.

The Government amendments give children aged 16 in England, Wales and Northern Ireland the legal capacity to give instructions for the management of their child trust fund accounts. That does not alter the rule that there can be no withdrawals from the account until the age of 18. We do not want to give children wider capacity to engage in all sorts of investment contracts—nor, I believe, do the Opposition. The advantage of the amendment is that it does not require the alteration of any other statute, so the drafting is more direct.

I understand that the hon. Gentleman is concerned about the position of under-age parents and tabled new clause 5 to address the fact that parents under 18 would not be able to manage the child trust fund accounts of their children. Delegating parental responsibility would be a radical departure from general law, which provides that parental responsibility cannot, as a personal responsibility, be transferred. I hope that his concerns will be allayed by the Government amendments, which mean that parents over the age of 16 will be able to manage their children's accounts. Statistics show that the vast majority of under-age parents are between the ages of 16 and 18. However, it remains the case that, as I outlined in Committee, if a parent is under the age of 16, their child's account will be opened directly by the Inland Revenue and invested in a stakeholder product.

Government amendments Nos. 33 and 34 ensure that, at any one time, only one person can give instructions about managing a child trust fund account. Where the child is aged 16 or over, it will usually be the child—otherwise, it will be a responsible person such as a parent or someone else with parental responsibility. That is to prevent possible confusion where more than one person has parental responsibility.

On those grounds, I ask the hon. Member for Tatton to withdraw his new clause and associated amendments and to support the Government amendments.

The amendments tabled by the hon. Member for Yeovil would allow 16-year-olds entering full-time employment to access their funds. On Second Reading, he argued that there was no obvious reason why those 16-year-olds should have to wait two years before accessing the funds in their child trust fund accounts, and he argued that again today. I am afraid that, as he suspected, that is a step too far for the Government. We have heard persuasive arguments that children should have to wait until they are 21, or even 25, to gain access to the funds, so that they are mature enough to decide how to use them. I do not accept that. The age of 18 strikes an appropriate balance, because it recognises that a child has reached the age of maturity, but does not allow undue access before then.

Mr. Laws

Does the Financial Secretary accept that young people who go into full-time work at the age of 16 assume enormous responsibilities, yet the Government's position is that they cannot exercise responsibility over the money in their child trust fund accounts and use it sensibly?

Ruth Kelly

I would not argue that in any particular case, whether a child is entering full-time employment at 16 or full-time education, they may or may not be responsible enough to exercise and make reasonable judgments about their future. An appropriate balance must be struck for the majority of children between allowing them to have access to the funds to further their goals, and forcing them to wait until they are sufficiently mature to make those decisions in their best interests. I do not think that the particular category of children who enter full-time employment at the age of 16 should be singled out. We must decide what is the appropriate age of maturity at which such decisions can be sensibly made. A balance must be struck, and that balance should be struck at the age of 18. For those reasons, the hon. Gentleman should accept the Government's case.

Mr. Osborne

This is an extraordinary moment that I must savour. I doubt whether in my time in opposition, which will of course be short-lived, I will again be able to point to an area of the law that I helped to change in such an obvious way. As a result of the Government amendments and the arguments that I advanced, 16 and 17-year-olds will now have the power to manage their own child trust fund accounts. I hope that that teaches them about providing savings for themselves, and that it helps them when they learn about child trust fund management in their classrooms. I look forward to 16 and 17-year-olds around the country writing to me to thank me for this new right that I have secured for them, but I suspect that I may have to wait a long time for the first letter.

The Financial Secretary is right that the Government amendments are far simpler and more elegant than mine. I merely took her at her word when she said that the matter was complex, so I went off to think of some complex thing that I had to do. As it turns out, it is simple. I am genuinely delighted that the Financial Secretary has listened and responded—she is a model, and other Ministers should follow her example—and secured the agreement of senior members of the Government Whips Office. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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