Grand Committee Report of 23 March 2004

Official Report of the Grand Committee on theChild Trust Funds Bill
(Second Day)
Tuesday, 23 March 2004.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Viscount Allenby of Megiddo) in the Chair.]
Clause 5 [Opening by responsible person or child]:
Baroness Wilcox moved Amendment No. 31:
Page 4, line 16, at end insert—
"( ) Regulations under subsection (4) shall permit applications to be made by electronic or other means which do not involve the physical transfer of the voucher to the account provider."
The noble Baroness said: In moving Amendment No. 31, I shall speak also to Amendment No. 34. Amendment No. 31 deals with electronic applications.
I know that the Minister will say that electronic applications are not forbidden by the regulations, but the regulations do not require the voucher to be transferred to the account provider, and that is what undermines electronic applications. The account provider would have to send documentation asking for the voucher and then have a system for receiving and storing it. The regulation also requires three years' storage and, presumably, potential retrieval.
The Children's Mutual told us that up to 50 per cent of electronic applications for investment accounts are not followed up when the paperwork is sent. If that is the experience for child trust funds, there will be many accounts that cannot be fully activated for want of a voucher. That will add to providers' costs, and brings us back to the issue of the charge cap, which we have already debated.
I hope that the Minister can explain why the Government are insisting on this archaic paper-based system. It cannot be for fear of fraud because it is difficult to think of any kind of fraudster who would play an 18-year-long game for £250. In any event, unique numbers can minimise the possibility of fraud. I do not know why Tesco can issue me with e-vouchers for use when I shop online but the Government cannot do the same for child trust funds.
Amendment No. 34 is partially directed at this issue, and, more widely, at the way in which the voucher system is working. It requires a report on the voucher system to be prepared after two years' operation. If the Government have imposed massive bureaucracy on providers, this review would provide a mechanism for that problem to be aired and, it is to be hoped, addressed.
My concern is the burden on providers, but there are other aspects, such as the costs of the Inland Revenue and its effectiveness in communicating with parents. All in all, we believe that a review is a good idea. We hope that the Government will agree. I beg to move.
Lord Newby: Amendment No. 31 seems eminently sensible. Given that the Revenue will be required to open child trust funds for those parents who do not turn up with a voucher, anything that can be done to make it easier for people to register with a provider would be sensible. Young people, in particular, communicate electronically these days—not least with financial institutions—and find paper an alien media. Young parents would take up the system outlined in Amendment No. 31. It would work to their advantage and, in the longer run, to the advantage of the Revenue as well.
Lord Naseby: I must first declare an interest as chairman of the Children's Mutual. I hope that that declaration can last for the whole of this Committee sitting. Secondly, the Committee will notice that I have tabled an amendment that is marginally more succinct than the one tabled by my colleagues on the Front Bench.
The reason that I have tabled the amendment—or, rather, that I pinched their original amendment, to be totally honest—is that, even at the launch of the child trust fund, we are dealing with an 18-year period, albeit that Amendment No. 34 may find favour with the Minister. We do not know whether or not it will but, even if it does, we are nevertheless talking about a timespan in which governments are not too used to operating. The voucher as such might well disappear at some point. Who is to know over an 18-year period?
Since we—that is, the Children's Mutual—were engaged in discussions with officials about the original structure, from the start we were fully supportive of the concept of a voucher. I reiterate that. It is an excellent method to ensure that parents/guardians are aware that they have something of value that has come from the government of the day, which will provide information about their choices. In short, it is an excellent way to engage and potentially encourage people to save for their children. That is the whole principle of the child trust fund.
However, we currently differ with Her Majesty's Government, although one is ever hopeful, in that we thought that the Government were all enthused about a system where paper did not have to be transferred, and where an electronic means was to be the way forward. In fact, there are many government consultation documents which indicate that that is the way forward. Indeed, there are some of us who are a little slow at picking up the electronic means of communication, although I hasten to say that I am taking a crash course from my beloved wife. We are making progress. Before long, we shall be totally versatile with electronic means. But at this moment, as an ex pilot, I suppose that I have taken my initial flight and I am still doing circuits and humps. Be that as it may.

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We do not think that a voucher physically needs to be presented to the parent or guardian in every case. I think that the Minister will accept that we are hoping to encourage people to open accounts whenever possible. Therefore, on the assumption that both parents are working, the two most likely means that they will use are the telephone or the Internet. If that is so, should we—all of us who believe in child trust funds—say to them, "Once you have gone through that process, you have still got to remember to stick the voucher in the post"?
It may surprise the Minister, but our experience is that most people do not keep stamps at home. Those days are gone. Everyone kept stamps at home 10 to 15 years ago. But younger married couples do not have stamps at home because they communicate electronically. Occasionally, they may go out to buy a stamp or a book of stamps, but they do not keep them at home. That is a deterrent.
Lord Woolmer of Leeds: Does the noble Lord know that stamps can now be bought on the Internet from the Royal Mail? Stamps can be acquired and used electronically.
Lord Naseby: I am delighted to hear that. As I said, I have only just graduated to that. But in itself that is a second transaction. Presumably, one would have to access the Royal Mail. We forget. The noble Lord is a similar age to myself. I suspect that he has got grandchildren. We are not kept up all night. We transfer them back when it gets to around bedtime or beyond. Occasionally, we baby-sit and pray that they do not wake up. For a busy couple with a rotten child who keeps them awake all night, the last thing that they would want to do is a double entry on the Internet to determine how to get a stamp. I do not think that that is terribly helpful, is it?
My noble friend who leads us today alluded to my second issue. In the Children's Mutual, we have experience that is nothing to do with the child trust fund. Our experience is with the baby bond, which I accept does not have the same incentive as the child trust fund. I wish that it did. I wish someone would index link the amount of the contribution for tax exempt policies and perhaps at some time the Treasury would listen to that. That is probably marginally out of order, but it is on the record now.
Be that as it may, the basic point—it is important—is that in our experience people want to save. Those at the margin who are not totally committed—who are very busy, have five kids or whatever—take all the trouble to communicate electronically or by telephone and, at the moment, we have to send them back a policy application that they have to sign. That is all they have to do, just sign it. A stamped addressed envelope—nothing else. They do not have to apply on the net for a stamp. That is another deterrent but I shall leave that aside. Even so, half the people who have made the request themselves—they have not contacted us at our request—cannot be fagged to go through with it. I want the child trust fund to succeed,
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but the requirement by the Inland Revenue that a voucher has to be transmitted from A to B is a deterrent.
My noble friend indicated clearly what is the financial exposure to the Treasury at this point in time. Is it really likely that someone will carry out a major money-laundering activity based on £250 over 18 years? It is fairly unlikely. In any case, we have the unique reference number on each voucher. That in itself is a double check. There is no reason why one cannot transfer the unique number by telephone or by electronic means, which is itself a fundamental check. Therefore, the Government are putting a constraint on the success of the CTF.
The Minister may say that the whole thing will be reviewed in two years' time. However, I am a marketing man and he is a market research man and both of us know in our heart of hearts that the launch is crucial. It is jolly difficult to relaunch or to give something an added impetus. One has to make something as successful as one possibly can—or as big a failure as one possibly can if one is Coca-Cola. One needs to get the message over from the start. That is a hurdle, not put up by the Treasury but by the Inland Revenue. Someone in the Inland Revenue does not understand how electronic communication and telephone applications work today.
I have just applied to go and see my son in Warsaw. I have certain bonus points—I do not wish to advertise—on my American Express British Airways credit card. The whole of that transaction, which costs about £150 a ticket, has been carried out electronically. I have not had to send my statement from American Express that says that I have "X" number of bonus points exclusive to me, with my number on it. I have not had to do any of that. The whole thing was done over the telephone.
The Deputy Chairman of Committees (Viscount Allenby of Megiddo): I am sorry to have to interrupt the noble Lord, Lord Naseby, but we should adjourn for a Division in the House.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey): If the noble Lord has nearly finished, should he not be allowed to finish?
Lord Naseby: I could finish. That is one problem. The other one is that we are simply adding to the costs of providers. If any of the providers has to provide money there, that is money taken away from presenting the child trust fund to the general public.
[The Sitting was suspended for a Division in the House from 3.43 to 3.53 p.m.]
Lord McIntosh of Haringey: The amendments have been accurately described. They would remove the need for a paper voucher to be produced before an account can be opened. Of course, there is nothing to stop providers handling the administration of child trust fund accounts, either electronically or by telephone, as the noble Baroness, Lady Wilcox, acknowledged. Regarding another point that she

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made, it is also possible for the storage of the accounts to be carried out electronically. But we do, indeed, insist that there should be a paper voucher produced, either by post or in person, before an account is opened and there are good reasons for that.
First, a paper voucher plays a part in financial education, particularly for those who do not have any experience of dealing in financial products, who would not think of approaching providers by telephone or online. Parents will have a physical reminder of the amount that their child is entitled to and the handing over of the voucher emphasises the choice that they have made and the reasons that they have had for doing so.
It is not true that, as the noble Baroness, Lady Wilcox, suggested, this paper voucher will be archaic. It will contain vital information in the form of a barcode or microline comparable to the information on the bottom of cheques that will allow providers to scan the vouchers and put the information directly into their database. I would be surprised if many providers have the sort of objection described by the noble Lord, Lord Naseby, as coming from the Children's Mutual. This system would eliminate keying errors. It may not be well known, but 30 per cent of cases of incorrect combinations of ISAs are due to such errors. Clearly this is important because we can pay contributions only when providers' claims reconcile with the Inland Revenue's child trust fund database.
I agree that fraud on a large scale is hardly likely with these relatively small amounts of money. However, there is a role in reducing fraud. Sophisticated fraudsters can produce a copy of any document, but the voucher will be designed in a way to make copying difficult for less sophisticated people, so the providers will have a certain degree of confidence that the voucher accompanying the application to open the CTF is genuine. The electronic process would not provide that degree of certainty because it would be open to the possibility of Internet hackers opening multiple accounts. It is costly for both the Revenue and providers to unravel invalid or fraudulent CTF accounts and it costs less to prevent this happening in the first place. Vouchers can do that in a way that Internet or phone applications cannot. Providers will not have the burden of evaluating the information that they have been provided with against what they are required to ask for.
The noble Lord, Lord Naseby, suggested that we are requiring things to be done twice. However, any application on the Internet has to be followed by proof of identity which would have to be sent by post.
We have gone some way to satisfying the concerns raised by these amendments. We amended the Bill in the House of Commons to include the requirement to obtain the voucher in regulations, because that gives us the flexibility to change the system in future if we need to. That also deals with the issue raised in Amendment No. 34 about an independent review. The Financial Secretary specifically said on Report in the Commons that the collection of the voucher would be set out in regulations to allow the flexibility to change the
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requirement if that seemed appropriate. She said that it would be monitored to see whether it is indeed necessary to the smooth operation of the CTF. Bearing in mind that, following the review and monitoring that will take place, we will be able to change the system by regulation if we need to, I suggest that we leave the Bill as it is.
Baroness Wilcox: I thank the noble Lord, Lord Newby, for the Liberal Democrats' support for Amendment No. 31. I listened with interest to my noble friend Lord Naseby speaking, as he does, so eloquently and practically on behalf of the Children's Mutual. I also listened to the Minister's reply and smiled somewhat, because this is a modern Government and the cumbersome and slightly troublesome method that we will be using will produce double handling, but there we are.
I was interested to hear that the voucher itself will be able to be scanned—which I had not realised—and to be reminded that the Government are prepared to change the system in the future if need be. I am sorry that the Minister will not harden that up a bit by including a report after two years' operation. However, this is the best that we are going to get, so I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4 p.m.
Lord Naseby had given notice of his intention to move Amendment No. 32:
Page 4, line 16, at end insert—
"( ) Regulations made under this section must permit applications to be made by wholly electronic means."
The noble Lord said: I believe that Amendment No. 31, which has been withdrawn, stands in my noble friend's name. Perhaps I may respond to Amendment No. 32.
The Deputy Chairman of Committees: Yes, certainly.
Lord Naseby: I am most grateful. Perhaps the Minister can clarify one point. He said that the vouchers could be stored electronically. Does that mean that, once a voucher is stored electronically, the paper voucher can be destroyed?
Lord McIntosh of Haringey: No, it just means that interrogation of the contents of the voucher will be electronic. The voucher itself will remain with the parent. Oh! I am wrong; they can be destroyed. There we have it: instant success.
Lord Naseby: I am most grateful for the forthcoming manner in which the Minister was able to offer that to providers. I think that that will help all of them.
Is it not the case that the Minister is not quite right in suggesting that providers must have proof of identity, when of course every provider will communicate with whoever has applied and the child? An automatic means of communication will take place, so it is not an added burden or something new.

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Secondly, the Minister might think that the Children's Mutual is out on a limb and is the only provider that believes what I have said. Although I cannot claim to have spoken to every potential provider, all those to which I have spoken who expect to be the dominant providers are of the same view as we are. Far from the Children's Mutual being a minority provider, the Minister will find that the vast majority of other providers share the view that I have expressed today.
The Minister said that 30 per cent of ISAs had keying-in errors. If I had 3 per cent keying-in errors at Children's Mutual, someone would look at it. The figure of 30 per cent keying-in errors is huge. Any percentage amount of keying-in errors in double figures is unacceptable, so I hope that the Minister will not use that as one reason why we cannot have electronic means.
The Minister told us about the Internet hackers producing multiple errors. That is fantasy, is it not? The real point, as my noble friend who leads for the Opposition said, is that we understood that this modern Government wanted to communicate electronically; the providers that have backed the child trust fund want to provide and to communicate electronically. Sadly, Her Majesty's Government and this Minister in particular—I do not mean to be personal, but he is taking the Bill through—are throwing out a wonderful opportunity.
This is the point that surprises me: the Minister is saying, "I will not even agree to a formal two-year review; I will put it in the regulations". I accept and recognise that the Minister is moving it from the Bill to the regulations, for which I thank him. But what problem is there with a formal two-year review? It is in Parliament's interest. Things may have to be changed either way, but if it is just left, that does not suggest to me that people are really focusing on the issues. Other issues will interfere, and some other scheme or issue will take the time of the Inland Revenue or the Treasury—perhaps we will be in the middle of a general election or whatever.
I urge the Minister to think hard about Report, perhaps not this afternoon, and to see whether we cannot get on to the statute book at least a formal two-year review.
Lord McIntosh of Haringey: I have responded, I think, to the main points, but I will be happy to respond to some additional ones. First, I did not suggest that the Children's Mutual was on its own and that nobody else had objected. I do not know the collective view of providers or whether they have expressed one. I certainly accept that the people to whom the noble Lord, Lord Naseby, has spoken agree with him. I would never doubt that.
Secondly, I did not say that 30 per cent of ISAs had errors; I said that 30 per cent of the cases of incorrect combinations of ISAs were due to keying-in errors. That is not the same thing.
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Thirdly, I come back to the issue of whether we are being "archaic", as the noble Baroness, Lady Wilcox, said. We are going to have microline on the vouchers, and we will have the possibility of automatic transcription of the essential features of a CTF voucher. Therefore, all the later work done by providers can be carried out electronically. For reasons of recognition by parents, particularly those who are not used to financial transactions and do not have access to electronic means of communications, it is useful to have a paper voucher at the beginning. Furthermore—although I do not make too much of this point—the possibility of fraud is reduced.
My fundamental point is that it is impossible to conceive that the child trust fund will not be crawled over. It will be crawled over by the Treasury Committee. It will be crawled over by the National Audit Office. Even if we did not want to have reviews and to consider the views of Parliament, on many occasions as we proceed with this new venture we will be obliged to do so. A formal two-year review might actually reduce the amount of scrutiny rather than increase it.
[Amendment No. 32 not moved.]
Lord McIntosh of Haringey moved Amendment No. 33:
Page 4, line 21, leave out subsection (6).
On Question, amendment agreed to.
[Amendment No. 34 not moved.]
Clause 5, as amended, agreed to.
[Amendments Nos. 35 to 37 not moved.]
Clause 6 [Opening by Inland Revenue]:
Lord Newby moved Amendment No. 38:
Page 4, line 26, leave out "a description so selected" and insert "one of the descriptions prescribed by regulations"
The noble Lord said: This amendment brings us back to an issue that we debated in our first day in Committee the Government's view that the equity-based child trust fund is a superior vehicle in all circumstances. The purpose of this amendment is to give the Government discretion to invest child trust fund money in accounts other than equity-based stakeholder accounts if the circumstances are such that that makes best financial sense.
We have already had a debate about the fact that equities have outperformed deposits in every 18-year period over the past 100 years. However, I should like to take a slightly different case. The Government are not just going to be putting funds into child trust funds at age zero; they will also be putting funds into child trust funds at age seven. With the plans for "lifestyling", the balance of the fund will in any event shift in the later years out of equities and no doubt into bonds. So if one puts money into an equity-based trust fund at age seven, that fund will not be wholly in equities for 18 years. It will not even be held in equities for 11 years. It will be in equities for a significantly shorter period. Over such a shorter period, my contention is that it is reasonable to suppose that some people will do very badly.
The example I should like to use is the hypothetical one of the Government having established this process in 1993 and put in a top-up in January 2000. In January 2000, the FTSE 100 index stood at about 6,700. Four years later, it stood, broadly speaking, at 4,500. It had diminished by about 50 per cent.
In January 2004, the child who was seven years old when the money was put into the fund would be aged 11 and, as I understand it, would be within a year or two of the lifestyling provision coming into force. Obviously, we do not know what will happen to the FTSE index over the next year or two. But I do not know anyone who believes that over the next two years the index will go from 4,500 to 6,700, which is the point at which it stood when the money would have been put in in my hypothetical case.
My contention is that only a foolhardy investor would have put money into an equity-based product in January 2000. For the Revenue to be forced to put money into an equity-based product at every point in the stock market cycle, even when there is widespread acceptance that we are at the top of a bubble, seems to be foolhardy. At the very least, the Government should give themselves the flexibility in legislation to direct those funds that they are establishing away from equities into a deposit-based child trust fund when market circumstances suggest that investing in equities is foolish. I beg to move.
Lord McIntosh of Haringey: I am not in a position to query the particular example given by the noble Lord, Lo rd Newby. Clearly he has done his homework. But he is talking about a rather extreme case, of the difference between ages seven and 11. He then said that there would be two years before the lifestyling provisions came into force when the child was 13. For the sake of argument, I shall accept his figures, but that does not deny the fact that the final judgment would be taken only at age 18. Most of the money will be invested at the beginning or spread out over the whole of the 18-year period. With a little ingenuity, if one can find one exception to the rule, that does not really cast very much doubt on the principle behind it; namely, that we want to provide the best possible value to all consumers.
The proposals follow the way in which we have introduced stakeholder investment products. Of course, more money can be put into equity ISAs than can be put into cash or insurance ISAs. Generally, I think that all parties have accepted that that is the right way to encourage equity investment.
Even in the particular case raised by the noble Lord, Lord Newby, it is a bit much to describe the investor as foolhardy. The investor might have been mistaken, but we have all done it. We are all in that position. I would rather be called mistaken than foolhardy because I did not anticipate what, in fact, no one anticipated.
Lord Naseby: The Minister is too modest. He will have reflected that the providers operating in this market will, one hopes, have recognised the situation in January 2000 and moved into high-yielding equities
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which by any yardstick would have been better than a deposit account at the time of about—I do not remember—1 per cent.
Lord McIntosh of Haringey: I am grateful for that support. And I am not usually called too modest. The point is that the stakeholder account has been selected as the most appropriate type to open for children where the Revenue needs to open an account for them. That is the important point. This is an amendment to Clause 5, which is a particular subset of child trust fund accounts.
Under the amendment, the Revenue—not the parent or responsible adult—would have to make a decision about which account to open. On what basis would the Revenue be making a decision? One can see the basis on which parents or responsible adults can make different decisions, but I cannot quite see what criteria would apply. It could mean that very different types of accounts are opened for children about whom the Revenue, by definition, knows nothing.
So the allocation of accounts by the Revenue is done by selecting the next provider of these accounts in rotation from the list. Providing for these children to have very different kinds of accounts opened for them by the Revenue by rotating through the providers and the types of accounts being offered would turn the whole thing into a lottery. I do not think that that is what the noble Lord, Lord Newby, would want.
I suggest that, in the light of the potential for children to be provided with less tightly specified accounts and the questions that arise over their potential to deliver the best returns over the long term, thus providing good value for money if they are not subject to the charge cap, means that I hope that the amendment will not be pressed today and, further, will not be brought back.
4.15 p.m.
Lord Newby: I am grateful to the Minister for that detailed reply. He has outlined a fascinating concept. Parents with varying degrees of financial literacy will be able to exercise judgment, but the Revenue will not be able to do so. That is a new one on me. I can only assume that what the Government really have in mind here is the fourth of their requirements for child trust funds; namely, that they will help to finance the education of the children involved, who may well find that their funds are worth significantly less than they might have envisaged. In effect, this may prove to be a costly demonstration of the fact that equities may go up and, equally, they sometimes go down. I shall not press the amendment, but beg leave to withdraw it.
Amendment, by leave, withdrawn.
[Amendment No. 39 not moved.]
Baroness Wilcox moved Amendment No. 40:
Page 4, line 40, at end insert ", or
( ) the child is under 16 and the responsible person in relation to the child is also under 16."
The noble Baroness said: In moving Amendment No. 40 I shall speak also to Amendment No. 41. The purpose of these amendments is to probe how

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accounts are opened for the children of those aged 18 years and under. This links with the amendments we discussed earlier in relation to Clause 5, and applications made by those who are aged 18 and under.
The amendments are probing in nature and are designed to find out how accounts will be opened for the children of children. They are alternative amendments dealing with the position of parents who are "responsible persons" aged under 16 years and under 18 years respectively. I believe that, under Clause 6, the Inland Revenue must wait until one year has passed before an account is opened for the child of a child. That is how Clause 6(5) appears to be constructed. I can see no reason for the one-year delay and the loss of compound return because, according to the regulations, it is impossible for a child responsible for a child to open the account. They have to rely on the Inland Revenue.
The amendments would require the Revenue to open the account without waiting for one year. I believe that the Government have accepted that 16 and 17 year-old parents can open accounts—we discussed that point on our previous day in Committee. However, there appears to be no alternative for underage parents to open an account other than by waiting for one year. In that case, I hope that Amendment No. 40 will commend itself to the Government. I beg to move.
Lord McIntosh of Haringey: The first amendment would require the Inland Revenue to open a child trust fund account where the child is under 16 and the person with parental responsibility is also under 16. In fact, the Bill already provides in Clause 6(5)(b) for the Revenue to open a child trust fund account for a child whose parents are aged under 16. That is because a person aged under 16 cannot act as a responsible person for the child trust fund. The amendment, therefore, is already covered by the provisions in the Bill.
The Revenue cannot open an account for children with parents aged under 16 automatically, which is what the amendment would require, because it will not know from child benefit claimant details whether or not there is a person who can act as a responsible person for the child's account. Where there is a person who is able to exercise the parental responsibility in this way, we want that person rather than the Revenue to have the opportunity to take an active role in the choice and management of the child trust fund account. In other words, if a grandparent can assume the role, that can be done; or it can be done by the Revenue. However, we can deal with this on a case-by-case basis. The amendment would prevent us from doing so. But if there is no one who can act as a responsible adult, parents can contact the Inland Revenue when they receive a voucher so that the account can be opened for the child as soon as possible—again, there is no question of having to wait for a year.
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The information pack will make it clear that when there is no one with parental responsibility aged 16 or above, all that will be required is a simple telephone call to the Inland Revenue to arrange for an account to be opened. Parents under 16 will be able to change the account type or the account provider, if that is what they desire, as soon as they turn 16.
The second amendment would require the Inland Revenue to open a child trust fund account where the child is under 16 and the parents are under 18. I do not understand why we need the intervention of the Inland Revenue here, because parents of 16 and over are able to open a child trust fund account for their child. That is covered in Clause 3(10). I really do not understand why the two amendments are tabled together. I trust that on that basis the amendments will not be pressed.
Baroness Wilcox: I thank the Minister for his reply. The amendment I have moved and spoken to was tabled by my colleague and I would like her to read the answer that the Government have given so that she may respond if she so wishes. I beg leave to withdraw the amendment.
Lord Naseby: There is just one point I wish to raise. Let us assume for a moment that the mother is 14 and therefore is some way off from being 16. Let us also assume that it takes some time to find a responsible person. What is the position of the child when the voucher is eventually issued? Is it backdated to the birth of the child or is the operational date that at which one has discovered who will vouch for the child?
Lord McIntosh of Haringey: The child trust fund voucher is always issued from the date of birth.
Amendment, by leave, withdrawn.
[Amendment No. 41 not moved.]
Clause 6 agreed to.
Clause 7 [Transfers]:
Baroness Wilcox moved Amendment No. 42:
Page 5, line 10, at end insert—
"( ) Regulations under subsection (1) shall include provisions about the circumstances in which the agreement of the person with the authority to manage a child trust fund is required."
The noble Baroness said: Amendment No. 7 focuses on the circumstances when a child trust fund may be transferred from one account provider to another. Clause 7, as currently drafted, is very brief. It states:
"Regulations may make provision about the circumstances in which—

(a) a child trust fund which is an account of one of the descriptions prescribed by regulations may become an account of another of those descriptions, and

(b) a child trust fund held with one account provider may be transferred to another".

It is certainly necessary to have a clause in the Bill which allows for a transfer of a CTF from one provider to another. That would allow the responsible person managing the CTF to decide to change the type of CTF account and that right should always be available. However, there is an alternative situation which could be envisaged—one where a CTF provider is taken over, goes bust, merges or perhaps just

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changes the services on offer and wishes to discontinue the provision of CTF accounts. In such circumstances and as provided for by clause 7, as I read it, the provider could transfer the child trust funds under their management to another provider without the consent of the responsible person. Presumably the responsible person could subsequently move their CTF to another provider as is their right at any time, but they would be in a situation where a decision had been made already about their CTF account without anyone informing them until after the event.
That seems to be an unsatisfactory situation and we have tabled our amendment accordingly to probe the point. I appreciate that not all CTFs will have a parent as the responsible person and in some situations the Inland Revenue will have to act for the child in decisions affecting their CTFs. The amendment provides flexibility by allowing regulations to set out circumstances where it is thought appropriate for transfers not to be carried out without the agreement of the person who manages that fund. We do not envisage the creation of a loophole by which a responsible person could block the winding up of a provider because they could refuse to agree to transfer the CTF to another provider.
All we are seeking is some reassurance that, wherever possible, those responsible for managing CTFs will be told when it is necessary for account providers to transfer their CTF to an alternative provider. In such circumstances, the responsible person could make an informed decision about which provider they will move to. I beg to move.
Lord McIntosh of Haringey: I think I can give that assurance. I agree that Clause 7 is not the easiest to read. However, the Explanatory Notes make it clear that the clause gives the Treasury power to make regulations allowing a responsible person to change the type of CTF account, for example, from a cash to a stakeholder CTF account and to move a CTF account from one provider to a different provider.
So that is what Clause 7 does. It requires that instructions on the management of the account can be given to the provider only by the person with authority. The instructions will cover matters such as whether the account is a stakeholder or non-stakeholder account; what investments will be bought, sold and held in the account; and whether the account will be transferred to another provider. The provider has no authority to act except in accordance with those instructions. If it did, the FSA and the Inland Revenue would want to know why.
I think the concern is that the child trust fund account could be transferred without the agreement of the person with authority. However, the draft regulations allow accounts to be transferred only at the request of the registered contact, who is that person.
As to the point made by the noble Baroness, Lady Wilcox, there may be circumstances where, to avoid disadvantaging a child, we would want to provide for a transfer without the responsible person's authority—for example, as she said, where a provider ceases to conduct child trust fund business. In these cases,
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providers contact the people managing accounts to let them know what is happening. However, the Inland Revenue's experience in running the ISA scheme is that some people will not reply. In those exceptional circumstances, the Revenue will use its care and management powers to arrange for the account to be transferred to ensure that the child is not disadvantaged.
Amendment, by leave, withdrawn.
Baroness Wilcox: I thank the Minister for that clarification. I beg leave to withdraw the amendment.
Clause 7 agreed to.
Baroness Wilcox moved Amendment No. 43:
After Clause 7, insert the following new clause—
"REPORT ON READINESS OF THE INLAND REVENUE
(1) The Chancellor of the Exchequer shall lay before each House of Parliament a report on the readiness of the Inland Revenue to carry out its functions under this Act.
(2) The report under subsection (1) shall not be laid before each House of Parliament until such time as the Chancellor of the Exchequer is satisfied that vouchers will be distributed in respect of all eligible children born before the date on which the first order is made under section 27 and no later than two months after the date of the order."
The noble Baroness said: In moving Amendment No. 43, I shall speak also to Amendments Nos. 88 and 90. The focus of the amendments is to ensure that no order is made under Clause 27, which is the commencement order, until the Chancellor of the Exchequer has laid before both Houses of Parliament a report setting out that the Inland Revenue is suitably prepared. We have laid down some criteria here in subsection (2) of our new clause. This states that the Chancellor should be satisfied that vouchers will be sent out to all eligible children born before the date the commencement order is laid, within a two-month period from the date of that same order.
Our aim here is to tease out further details on whether the Inland Revenue is adequately prepared to take on the burden of administering CTFs. We are talking here about resources, capacity and, specifically, the IT systems. Here I must declare a previous interest. For three years in the 1990s, I was on the board of the Inland Revenue when we brought in self-assessment. I saw at first hand how unprepared we were and how difficult, complicated and, at some stages, disastrous the IT systems were. We need to be sure that there is no risk that the Inland Revenue will be, as it was then, overburdened. Is it too much to ask the Chancellor to guarantee that by laying a report before Parliament? In discussion in the other place, the Minister emphasised that the Inland Revenue was prepared and that she was having ongoing meetings with it to ensure that that was the case.
We are, however, talking about a massive commitment of public money. It would be a nightmare if the IT systems were not sufficiently ready and there was an administrative crisis. In our amendment we draw attention in particular to the backlog of CTFs which will have to be processed. Can the Minister assure us that the Inland Revenue can guarantee that those funds will be set up within two months of the

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date of the commencement order? We have a new system coming into force which is essentially untried and untested. We know that account providers have had severe doubts about how the new voucher system will function and about how the timing of the backlog of CTFs will work.
It would be highly inadvisable to have a commencement order for CTFs unless the Chancellor were convinced that the Inland Revenue was sufficiently prepared and could lay a report before both Houses of Parliament to that effect. Fears have been voiced by many providers about how the administrative detail will work in conjunction with the Inland Revenue, and we know that the FSA is consulting on its sales regime until October this year.
If I were to be cynical, I might say that the Government were rushing to push for commencement in April 2005 as a prelude to the general election. We on these Benches see no justification for commencement until we are certain that the systems are in place within the Inland Revenue to deal with the massive amount of work which the initiation of such a scheme will entail. To do anything else would be irresponsible. I beg to move.
4.30 p.m.
Lord Naseby: I support my noble friend, particularly the point that she made about two thirds of the way through her remarks, which basically recorded that the FSA will itself not be ready at the beginning of October. The most recent letter that I have seen from the FSA was dated 2 March, when it said that it did not expect to be ready or to have the final rules by the end of October. I think that I have already given a copy of the letter to the Minister, but I am happy to give him another one. The person who writes from the FSA, Mr Norman Digance in business standards, to my chief executive, goes on to say:
"I appreciate that the timing is somewhat tight given the Government's expectation that firms will be in a position to open accounts for those born since September 2002 from January 2005 in readiness for accepting money into them from April".
What my noble friend questions seems entirely valid. There would be nothing worse for the Government and those who support the whole concept than to have it fouled up because the Revenue is not ready. I hope that the Minister will be able to reassure us with robustness on the amendment.
Lord McIntosh of Haringey: The noble Baroness said that she might be cynical; I have never known her be cynical. If I were to be cynical, I might suggest that when she was on the board of the Inland Revenue and there were difficulties with introducing self-assessment in 1990, the then Chancellor of the Exchequer probably assured Parliament that everything was all right. I bet he did; I bet he was required to do so.
Of course it is important that the Revenue be ready and that everyone can assure themselves that that is the case. The Revenue has undertaken a full review of the risks to the CTF delivery schedule between now and April 2005 and has taken steps to reduce the likelihood
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of difficulties occurring. The progress made in preparing for the launch of the child trust fund is tracked at a series of fortnightly and monthly meetings, and I am happy to say that the Revenue is fully on schedule with all activities to date. The Government are confident that the child trust fund can be delivered on time.
The amendments refer in particular to the proposed phasing in of vouchers to children born before 2005, and certainly there is here a peak which will have to be dealt with. The Opposition is concerned that this could be a burden on providers. In fact, the contrary is the case. As with other aspects of the child trust fund, this has been discussed in informal consultation with the providers as a way of managing a potentially high peak of work in April 2005. Providers have supported the measure, seeing it as an opportunity to spread their workload over months rather than days.
The noble Lord, Lord Naseby, raised the issue of the FSA publication on the sales regime. As I think I said at Second Reading, the FSA is planning to publish its consultation paper on the sales regime towards the end of April; that is, in just over a month. Thus the outline of what is being proposed, subject to consultation, will be known at that time. Following that will be a three-month consultation period to give people an opportunity to make their comments. Time must also be allowed for an analysis of those responses. That is the reason why the final document will not be published until October 2004.
At that point, firms in the industry will be able to begin applying to the Revenue to be approved and registered as child trust fund providers. It is not a final deadline for them. A number of months will still be available to them after October 2004. I hope that that is reassuring.
Lord Naseby: I understand entirely what the Minister has said. The draft regulations from the FSA will be available at the end of April and a three-month consultation will take place during May, June and July. Given that the FSA, the Treasury and the Inland Revenue have been working extensively on this, it is difficult to understand why it will take them another three months to come to firm conclusions, particularly when the application date is set at the beginning of October. I fail to understand why the Government cannot ensure that the two are synchronised, which would certainly make it easier for the providers.
Lord McIntosh of Haringey: The idea is that they will be very closely synchronised. I agree that the opening date will be 1 October 2004 and that the final rules will be published in that month.
Lord Naseby: The end of October?
Lord McIntosh of Haringey: In the month of October—I did not understand it to be at the end of that month. I shall convey the views of the noble Lord, Lord Naseby, to the appropriate quarters.
Lord Naseby: I am most grateful to the Minister for doing that, but the letter states specifically that the final rules will be published by the end of October. I do not know whether that might mean the middle of the month. But, either way, I hope that the Minister will be able to put pressure on all parties to ensure that all this happens by 1 October.
Lord McIntosh of Haringey: This sounds like someone is being cautious. I shall convey the noble Lord's views and write to him.
Baroness Wilcox: The Minister is aware that we support this Bill and these amendments were designed to do just that; that is, to try to bring this proposal to fruition safely, in good time and without embarrassment. In rejecting our suggestions, I hope that the Government do not find themselves embarrassed at a later date. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 44 not moved.]
Lord Newby moved Amendment No. 45:
After Clause 7, insert the following new clause—
"PAYMENTS AT AGE OF MAJORITY
(1) Where the eligible child has been on the child protection register within the two year period up to the date of attaining the age of majority, the Inland Revenue shall request payment advice from the relevant local authority.
(2) The relevant local authority shall undertake a comprehensive assessment of the risk of significant harm the payment presents to the eligible child.
(3) Based on the assessment in subsection (2) the relevant local authority shall provide payment advice to the Inland Revenue.
(4) If the payment advice is that the payment presents a risk of significant harm, the local authority shall—

(a) undertake to provide a package of social care to the eligible child, in order for payment to be made without it presenting a risk, or

(b) hold the fund on trust for the eligible child until age 24 or, if sooner, until the payment presents no further risk.

(5) Proof of identity shall be sufficient proof for receipt of payment.
(6) Regulations may stipulate what would constitute sufficient proof of identity and what form notification of entitlement by the Inland Revenue shall take.
(7) Where the eligible child lacks the appropriate capacity to deal with their financial affairs at the age of majority, the provisions of the mental incapacity legislation in force at that time will apply."
The noble Lord said: During our first sitting in Committee we spent a certain amount of time discussing the extent to which it might be possible to prevent young people spending their child trust fund in a wasteful manner. This amendment seeks to deal with rather more difficult circumstances; namely, where, for one reason or another, vulnerable young people find that the child trust fund money is used in ways that are positively harmful.
I have tabled the amendment following discussions with representatives of the NSPCC, which is very concerned about this matter. Perhaps I may detail two sets of circumstances that exemplify the situations which are of concern to the NSPCC and myself.
The first circumstance concerns a vulnerable young adult aged 18 in local authority care with drug problems. On turning 18, he is about to leave the safety net of the care home, at which point the young person is also suddenly given the windfall of a child trust fund. One can easily imagine, in those circumstances, that it would be accepted with gratitude since it would provide a means of feeding the drug habit. Another possible scenario is that of children involved in prostitution. They would be forced to hand over their child trust fund money to a pimp.
I realise that while it is relatively easy to cite such difficult examples, it is much more difficult to provide the solutions. I do not claim that this amendment is perfect, but perhaps I may explain briefly what it seeks to do.
Basically, for all children who have been registered on the child protection register for a period of two years up to their reaching the age of 18, the relevant local authority would be required to,
"undertake a comprehensive assessment of the risk of significant harm which the payment of the child trust fund presents to the eligible child".
On the basis of that assessment, the local authority would provide advice to the Inland Revenue. If the advice suggests that payment would present a risk, the local authority should undertake to provide a package of social care while the fund itself is held in trust until either the child is deemed by the local authority no longer to be at risk or when the child reaches the age of 24.
I accept that this amendment may not be perfect, but I think that there is a serious issue to be addressed. The NSPCC has made the point that if child trust funds were seen to be spent in ways that are positively harmful to young people, that would severely damage the concept of the trust fund itself. I certainly agree with that view.
While I would be delighted if it were possible for the whole amendment to be adopted by the Government, the broader question of local authorities providing risk assessments and support for a child specifically in relation to that child receiving child trust fund money is an extremely important and serious one. I should be most grateful for any assurance that the Minister is able to give me on this. I beg to move.
Lord McIntosh of Haringey: I make nothing of the drafting because it is important that we discuss the issues raised by the amendment. Since we are in Grand Committee, we can deal with issues of drafting at a later stage if that is necessary.
However, I have both principled and practical problems with the thrust of the amendment. The problem of principle is well known. When a child reaches the age of 18, he or she becomes an adult. To take away the property of the 18 year-old would raise serious issues with the Human Rights Act. All the money in a child trust fund belongs to the child from the day that it is put into the account. What is being suggested here is that we should take away the property of a person who is, by the age of 18 years, an adult in the eyes of the law.

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We have been through the arguments about the age of majority for different purposes, such as serving in the Army, getting married, voting and so forth, but the age of 18 for these purposes—and for most other purposes—is the age at which a child becomes an adult. There is no basis for intervention by the Inland Revenue or any other body. Indeed, the role of the Inland Revenue and local authorities in the Bill is limited very much to ensuring that all eligible children get a child trust fund account. It does not envisage administering the account in any way.
The amendment talks about the circumstances where a child has been on the child protection register within the two-year period up to the date of attaining the age of majority. It is a well thought-out way of getting a local authority to investigate whether there is a risk of significant harm to the child. I have two points to make. First, many vulnerable 18 year-olds will never have been on the child protection register. Secondly, many people who have been on the child protection register, even in the previous two years, will be no longer at risk. In many cases, there will be a very poor match between being on the child protection register and being vulnerable in the way that the amendment anticipates.
Local authorities should not automatically withdraw help from young adults who have reached 18, although that is the age at which all children are de-registered from the child protection register. We must rely on local authorities and oblige them to take continuing responsibility. That, I suggest, is the best way of dealing with young adults at risk, within the law as it stands and the provisions of the Human Rights Act.
4.45 p.m.
Lord Newby: I am grateful to the Minister for that reply. As I said, the key issue is local authorities taking ongoing responsibility for particularly vulnerable and at-risk young people.
Lord McIntosh of Haringey: I apologise; I failed to respond to the last point in the amendment relating to mental incapacity legislation. Whatever mental incapacity legislation is in force at the relevant time will apply to children's trust funds.
Lord Newby: I am grateful to the Minister for that further clarification. The key issue is the extent to which local authorities will exercise ongoing responsibility towards such young people, and have a particular view and focus on that point. I shall give further thought to the Minister's comments, but I may return to the issue on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 [Initial contribution by Inland Revenue]:
[Amendment No. 46 not moved.]
Baroness Wilcox moved Amendment No. 47:
Page 5, line 17, at end insert—
"( ) If the Inland Revenue make the payment referred to in subsection (1) after 30 days from the latest of the receipt of the information referred to in paragraph (a) and the receipt of a valid claim referred to in paragraph (b), the payment shall include an additional amount calculated in accordance with regulations."
The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 52 and 60. All the amendments require the Inland Revenue to make an additional payment if it is late in paying what it should pay. That will compensate the child trust fund for loss of return on the funds that could have been invested earlier. Amendment No. 47 applies to the payment of initial contributions by the Inland Revenue under Clause 8; Amendment No. 52 applies to Clause 9, which deals with supplementary contribution payments; and Amendment No. 60 applies to the further contributions that may or may not be made under Clause 10.
Each amendment allows the Inland Revenue 30 days to make the payment, which seems reasonable in the light of payment policies generally. It is, I believe, a period found in other Inland Revenue legislation. The amendments refer to an additional amount rather than interest, because I believe that the Inland Revenue is averse to paying interest as such. It would be for the Government to decide in regulations what rate should be paid and how it should be calculated. I hope that the Government will regard that as reasonable. I beg to move.
Lord McIntosh of Haringey: There are two issues. One is potential delay; the other is interest. The system proposed in the Bill has been worked out by the Revenue with the providers to produce a system that will get money into children's accounts quickly and therefore start to earn interest. That is why, for instance, child trust fund providers are required to make fortnightly returns of claims received. The system is designed to automatically check and pay claims. When the information supplied by a provider reconciles with the information held on the CPS system, the claim will be paid automatically. That will normally be done through the bank clearing system, so there will be up to 14 days plus however many days the money takes to go through BACS.
There should be delay only when the information does not reconcile and further information is needed to process the claim. Again, if providers provide accurate information quickly, delay should be minimal with the claim being paid on receipt of the provider's next claim—in other words, well within the 30 days time scale proposed by the amendment. Of course, there could also be delay because of suspected fraud. There should be very few instances where a valid claim is paid late, and so late that it significantly affects the income and growth of the child trust fund.
No one can deny that things can and will go wrong. However, we do not think that further regulations are necessarily the best way to address those problems because—this is my answer to the second point—the Revenue already has a compensation scheme to deal with such delays. It would add to the costs of administering the child trust fund to create another compensation scheme especially for that purpose.

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Code of Practice 1—Putting Things Right states that the Revenue will,
"correct the mistake so that, where possible, your affairs will be in the same position as if we hadn't made the mistake".
Any compensation paid will include an amount for income or growth lost through a Revenue delay. I hope that that is reassuring.
Baroness Wilcox: I thank the Minister. I smiled a little when he said "should be"; I remember times when the Inland Revenue and I had long ongoing conversations and I found myself receiving very little support afterwards. I shall read carefully what he said and, for the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 48 not moved.]
Clause 8 agreed to.
Clause 9 [Supplementary contribution by Inland Revenue]:
[Amendments Nos. 49 and 50 not moved.]
Baroness Wilcox moved Amendment No. 51:
Page 5, line 26. at end insert—
"( ) The amount prescribed for the purposes of subsection (2) shall be not less than the amount prescribed for the purposes of section 8(1)."
The noble Baroness said: The amendment simply probes Clause 9, which provides for supplementary contributions to be paid to children in families on lower incomes. Our amendment requires the amount of the supplementary contributions under Clause 9 to be not less than the basic contribution under Clause 8.
The Explanatory Notes state, at paragraph 38, that the amount payable under Clause 9 "will be £250". I am aware that the draft regulations prescribe £250. However, nothing in the Bill prevents a government prescribing a lesser amount at a late stage. The Government have said that they are concerned about poorer children, but they have not protected them in the Bill, which is what my amendment seeks to do. I beg to move.
Lord McIntosh of Haringey: This Government have committed themselves to the Bill; the Conservative Party has committed itself to the Bill; only a Liberal Democrat government would withdraw the whole thing, so we are reasonably secure.
Of course it is difficult for people on lower incomes to save, because they very often need to spend every penny that they have. That is why we have an additional endowment—the supplementary contribution—for children in low-income families, to help their accounts get off to a good start. We have made eligibility as straightforward as we can. Children will be eligible for the supplementary contribution if they are part of a household receiving child tax credit with an income below the child tax credit threshold, which is currently £13,230 but will go up under the Budget to £13,480 for 2004–05. The amount of the supplementary payment will be £250 on top of the initial payment of £250.
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The amendment would commit this and future governments to the amount of the supplementary contribution being at least the value of the initial contribution. That would give any government, present or future, less flexibility. It would deny them the flexibility they might need to determine the value. We believe that it would be unwise to put this kind of rule on the face of the Bill. We want to give future governments full flexibility to manage the child trust fund in the light of future developments, needs and opportunities, rather than tying their hands indefinitely. The limit will be kept under review in the light of the progress of the child trust fund.
Lord Naseby: I listened carefully to the Minister's answer and I was somewhat surprised by it. We are of course dealing with a Bill, which will become an Act, which will last for 18 years for a child. As the Minister rightly said, the two major political parties have committed themselves to this.
The only scenario that immediately comes to mind of where the Government have changed their mind is on ISAs. Many people, when they entered into the ISA regime, thought, perhaps foolishly, that the equity ISA would be stuck at £7,000. People may have hoped that it would be upgraded with inflation but they never conceived that it would be cut back; that savings would be disallowed and that people would be put off saving. They certainly never believed that the cash ISA would be cut back.
I am surprised that the Minister does not recognise that problem. We are not dealing with adults here; we are dealing with the children of the nation. The vast majority of Members of Parliament in the other place and Members of this House support the Bill; they support the children and future children of our country.
The sum of £250 is not a fortune, but it is significant. Is the Minister really saying that the present Labour Government are not prepared to put on the face of the Bill the fact that it will be at least £250? It will be up to them and, indeed, future Conservative governments to upgrade it if they so wish. I am not on the Front Bench, but I shall certainly petition my Front Bench if anyone suggests that the subsequent amount should be reduced below £250. I cannot see where the Minister is coming from unless, like the ISA, the sum is to be cut.
Lord McIntosh of Haringey: I would love to engage with the noble Lord, Lord Naseby, in a debate about ISAs. It has always been recognised that the effect of tax-free investment schemes is cumulative. If you go on with them for many years, at some stage something has to be done to stop matters getting out of hand. But that is not the subject of the Bill, and it would be quite wrong of me to rise to the temptation to debate it.
I am following the principle that, where possible, we should avoid committing future governments to specific figures. That is why, for example, when you introduce a custodial sentence or a fine, you do not lay it out in figures; you say that the fine is on such and such a scale and then future governments and future Parliaments can change it. That is the principle behind

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what we are doing here. We have no more intention than the Opposition of reneging on a commitment that we have made in public. It is merely that it is not appropriate for it to be on the face of the Bill.
Baroness Wilcox: I am disappointed with the Minister's response. I cannot express the position any better than my noble friend Lord Naseby did. So, disappointed, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 52 not moved.]
5 p.m.
Baroness Wilcox moved Amendment No. 53:
Page 5, line 35, leave out "entitled to" and insert "eligible for"
The noble Baroness said: In moving this amendment, I shall speak also to Amendment No. 54. For the convenience of the Committee, I have grouped with these amendments our opposition to the Question whether Clause 9 should stand part of the Bill. Each addresses means testing, which is at the heart of the supplementary contribution proposed in Clause 9. We are concerned with the increasing level of means testing that the Government have introduced since 1997.
I shall deal first with the two amendments specifically, before turning to means testing more generally. Amendment No. 53 challenges why a parent must have established a claim for child tax credit before his or her child can have the supplementary contribution. Parents may not want to claim child tax credit. Not all parents want to submit to the indignity of claiming benefits, even if they are called credits. What take-up of child tax credits do the Government expect? How many children will that exclude from the supplementary amount? The Minister will be aware that take-up rates of other means-tested benefits can fall as low as 20 per cent, as in the case of the short-lived baby tax credits.
The second amendment would remove the second leg of the conditions provided for in Clause 9(5). Not only must the parent have claimed child tax credit; the parent's income must be lower than the threshold of £13,230. Child tax credit is payable in reducing amounts to parents whose incomes are higher than £13,230. But there is a cliff edge for the purpose of the supplementary child trust fund payment. An additional fl income for a parent means £250 less for the child. Does the Minister really think that that is fair?
Those are the technical points, but behind all of this is the intruder state. The Financial Secretary told the Standing Committee in another place that 40 per cent of children will be eligible for the supplementary contribution. So we will be starting the lives of four in 10 children born each year with the personal stigma of being means tested. That will be added to the stigma of those who receive free school meals. Children are starting life with a disadvantage imposed by the Government. We are concerned about that, and we are not alone, as the Child Poverty Action Group shares our concerns.
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The Government will start 40 per cent of people's lives on means testing, and by the time they retire around 60 per cent will be on means-tested pension credit. We find that a disturbing trend. The Government will justify that by saying that they are trying to help poor people, and may even claim that making them dependent on means testing for their child trust fund will magically make them asset owners and savers. But they seem blind to the increasing way in which they are taking money in tax and national insurance, even from the poor, in order to give it back on condition that they specifically claim it and subject themselves to a means test. That is not our way. I beg to move.
Lord McIntosh of Haringey: I am puzzled by the contrast between this group of amendments and that which we have just debated. In the debate on the previous amendment, the Conservative Party was keen to ensure that a supplementary payment would be not less than the original payment; in other words, not less than £250. Now it is being said, certainly by opposing the Question whether Clause 9 should stand part of the Bill, that there should be no progressive payment at all. That is what Clause 9 does. If you remove that clause, there will be nothing left.
I assume that the intention of replacing "entitled to" with "eligible for" is to make eligible the children whose parents have not claimed child tax credit but would be eligible to do so. One must still know whether or not they are eligible, so one still has what the noble Baroness, Lady Wilcox, calls a means test. I am puzzled by the amendments. Child tax credit is an enormous success as regards take-up. The threshold brings 40 per cent of all children into the higher rate endowment. Five and a half million children live in households with an income of less than £13,230. To remove the threshold completely would bring in 430,000 children, some of whom would be in families of very reasonable incomes—up to £55,000—and that does not seem defensible. The child tax credit is being taken up very successfully. By January 2004, the numbers who had taken it up since April 2003 were already 100 per cent of what we expected at the end of a full year. The amendments do not get rid of a means test. They simply ensure that those with fewer needs should get the supplementary payment. That is then contradicted by the proposal to take out Clause 9.
Lord Naseby: The Minister does a disservice to my noble friend. She made it clear that in this Committee she is probing the Minister for his response. The Minister's response was pretty woolly in relation to child trust credit. He said that basically after nine months the Government have hit their one-year target; that the whole thing is running smoothly and swimmingly; and that it is an enormous success.
My noble friend asked what percentage of people eligible for child tax credit are not taking it up. What happens to those children? That was her question. I would expect the Minister to have that answer to hand.

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The matter was raised at Second Reading, so it is not a new question. I am disappointed that he was unable to give an answer, but perhaps he overlooked it.
Lord McIntosh of Haringey: I can say that 6 million children are benefiting from the child tax credit. If I can add anything further, I shall do so in writing to the noble Baroness, Lady Wilcox, and the noble Lord, Lord Naseby.
Lord Naseby: This is an important dimension. It is the children who are eligible in the families not claiming about whom we should be concerned. That is the issue that on Report I shall want to follow further.
Lord McIntosh of Haringey: It is a little more complicated than that. The effect of the amendment would he that the Revenue should spend a great deal of time trying to contact parents who have not made themselves known by claiming the allowances to which they are entitled. No government have given high priority to that.
Baroness Wilcox: I thank my noble friend Lord Naseby very much for emphasising the question that I asked. I am sorry that the Minister is unable to answer today. Perhaps he will write to me with that answer because we are talking about people who will not claim; people who cannot bear to do so and therefore would disadvantage their own children. I await the Minister's reply in writing. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 54 not moved.]
Clause 9 agreed to.
Baroness Wilcox moved Amendment No. 55:
After Clause 9, insert the following new clause—
"ADDITIONAL CONTRIBUTIONS BY INLAND REVENUE FOR CHILDREN IN CARE
(1) If this section applies to a child, the Inland Revenue must inform the account provider with whom a child trust fund is held by the child that this section applies to the child.
(2) If the account provider makes a claim to the Inland Revenue in accordance with regulations, the Inland Revenue must pay to the account provider such amount as prescribed by regulations.
(3) The amount prescribed by regulations under subsection (2) shall he calculated so as to represent a percentage of the average value of subscriptions to child trust funds made during the preceding financial year.
(4) On receipt of payment the account provider must credit the child trust fund with the amount of the payment.
(5) This section applies to a child if—

(a) a child trust fund is held by the child, and

(b) the child was first an eligible child by virtue of section 2(1)(b)."

The noble Baroness said: Amendment No. 55 would insert a new clause after Clause 9. The other amendments in this group are consequential. We return to the topic of children in care, which we have debated a little in connection with earlier amendments. The one thing that we know about children in care is that they start their adult life disadvantaged. Currently, they have extremely low educational
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achievements. Barely more than one half of those children have one GCSE compared with 95 per cent of all other children. The position is not improving: the Government have even dropped their own modest target of increasing basic educational achievements.
Children in care are less likely to be in higher education or in employment when they leave school. Sadly, they are more likely to be on the wrong side of the criminal law. A looked-after child will qualify for a higher amount of £500 when his child trust fund is opened—at least, that is what the draft regulations provide. That does not appear to be required under the Bill. Perhaps the Minister would state the long-term intention of the Government for payments to the child trust funds of looked-after children. Would he also state why the entitlement to a higher or supplementary amount for looked-after children is not in the Bill?
The child is unlikely to have any further contributions paid into his account if he remains in care. Of course, some children move in and out of care and it may be that the children's parents or other relatives will contribute something, but we should not expect this to be the norm.
Our new clause would require the Inland Revenue to pay into the looked-after child's trust fund an amount which will equate to the average amount paid into all children's trust funds. If the scheme is successful overall and the average annual contribution to child trust funds is, say, £500, the Government would have to specify what percentage of that amount should be paid to the child trust funds of looked-after children. I hope that they would specify at least 100 per cent so that looked-after children benefit rateably with other children in society.
At the Report stage in another place the Financial Secretary said little more than that in the next 15 years or so the position of looked-after children would be examined further. But if child trust funds are to accumulate to any significant amount to help a young person leaving care, extra contributions need to be made throughout the 18 years, preferably as early as possible so that the amount can accumulate.
We should remember that, with no family behind them, the transition of a looked-after child into independent adulthood is a particularly testing time. Pathway plans and the like are all very well, but if there is one group of children that needs a proper financial start in adult life, it is this.
At this stage, my amendment is a probing one, which I am sure can be improved technically. For example, I am not certain how best to deal with children who move in and out of care. The amendment does not tackle this, but I assume that further regulation-making powers could do the trick. Can the Minister clarify the situation for such children? I beg to move.
Lord McIntosh of Haringey: Again, I make nothing of the drafting; it is not important. I am grateful that the noble Baroness, Lady Wilcox, shows concern for looked-after children who, I agree, are among, the most disadvantaged children in our society. We are certainly

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committed to making special arrangements to ensure that they are fully included in the child trust fund, but we shall do so by regulations. This is how I think I can give the assurance that the noble Baroness seeks.
I am pleased to say that the draft regulations provide for looked-after children who cannot receive a child trust fund through a child benefit award to have an account opened for them and to automatically receive a government endowment representing both the initial endowments, which all children will get, and the supplementary government endowments that will go to children in lower income families.
Again, all children who are being looked after at the age of seven—I agree that there are issues about children moving in and out of care—will also automatically receive the government endowments that other children will receive at that age. They will receive a sum amounting to both the endowment that all children will receive and the additional endowment that children from lower income families will receive.
So the Bill is a foundation on which to build for all looked-after children as well as all other children. It allows subscriptions into the child trust fund to be paid by anyone—family, friends, godparents, local authorities or the child himself or herself.
The amendments seek to boost the funds in the child trust fund accounts of a minority of looked-after children whose accounts have been opened by the Inland Revenue in the absence of a child benefit claim having been made on their behalf. It is true that these children may be among the most disadvantaged while they are being looked after, but the vast majority move out of care and will have families to care for them and to contribute to their child trust fund account in the same way as other children. As I said, while they are being looked after there is nothing to stop grandparents and other relatives or friends from contributing to their accounts.
I do not believe that further government payments for these children are the best way of helping them. Children move in and out of care and any government payment would be rather hit and miss. But we recognise that it is important that the pathway plan which local authorities develop with children leaving care should consider the child trust fund account. Financial issues are already taken into account in the pathway plan and we will ensure that specific consideration is given to the child trust fund account.
We are aware of some local authorities who have already taken financial education seriously. Warwickshire County Council has introduced a scheme where a savings account is opened for a foster child to help make them aware of the value of money as building up savings. But most financial education will be delivered in the school curriculum and that is the best place for it because it reaches all children.
Over the coming months and years we will consult with various bodies and organisations about financial education. As part of that, we want to address the particular needs that there may be for looked-after children and, if possible, include some looked-after
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children in our consultation—for example, through readers' panels. I am addressing the later amendments in the group that the noble Baroness, Lady Wilcox, did not have time to address, but I did not think that she would mind if I also considered those issues.
5.15 p.m.
Baroness Wilcox: I am grateful to the Minister for that full answer to what was a probing amendment. I shall read the Minister's comments carefully, but, for the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 [Further contributions by Inland Revenue]:
Baroness Wilcox moved Amendment No. 56:
Page 6, line 45, leave out "description" and insert "category"
The noble Baroness said: I shall speak briefly. Amendment No. 56 is designed to probe the drafting of Clause 10(1) and was suggested to us by the Law Society for Scotland. Clause 10 deals with the further contributions that the Government intend to make to children at the age of seven. As currently drafted, subsection (1) states that regulations may make provision for the Inland Revenue to make payments of certain amounts prescribed by regulations to account providers of CTFs held by:
"(a) eligible children, or
(b) any description of eligible children".
The Explanatory Notes state:
"Subsection (1) provides for those children to be eligible children as defined in this Bill (or a description of those children specified in the regulations)".
I find the drafting slightly confusing. Eligibility is already defined in the Bill regarding CTFs, initial contributions and supplementary contributions. The mention of a subsequent and further "description of eligible children" for the secondary contributions at age seven muddies the waters. What is the "description" of eligibility contained in regulations likely to look like? Will it merely reproduce what is already made clear on the face of the Bill as regards eligibility?
We have followed recommendation of the Law Society for Scotland that paragraph (b) should read:
"any category of eligible children".
The word "description" seems ambiguous and unclear, while "category" would at least involve some criteria that the regulations would prescribe. I beg to move.
Lord McIntosh of Haringey: I am grateful for that but I do not believe that the amendment would make any difference. There is nothing sinister about it—it is simply the drafting style that parliamentary counsel has used for a sub-set of eligible children. The term "description" is used throughout the Bill. For example, Clause 3 refers to "descriptions" of accounts where another draftsman might have used a different term. But in the example that I want to give, Clause 10 allows the Government to make further payments to CTF accounts held by eligible children or a sub-set of those children such as the sub-set already announced of children on their seventh birthday.

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The phrase,
"any description of eligible children",
simply allows us to define in regulations the particular sub-set to which payments will be made. And it would not make any difference if the word was changed to "category", it would just lead to inconsistency in the Bill.
Baroness Wilcox: I thank the Minister for that. I beg leave to withdraw the amendment.
Amendment. by leave, withdrawn.
[Amendment No. 57 not moved.]
Baroness Wilcox moved Amendment No. 58:
Page 6, line 46, at end insert—
'( ) The amount prescribed for the purpose of subsection (1) shall be not less than the amount prescribed at that time for the purpose of payments under section 8."
The noble Baroness said: The amendment is designed to probe the Government to see whether they have any further thoughts about the amount they intend to contribute under the provisions of Clause 10 covering the contribution to be made, as I understand it, at the age of seven. We know that the initial contributions are to be £250 under Clause 8 and a £250 supplementary contribution for low income families under Clause 9. The Explanatory Notes confirm that the payments will be made at the age of seven, but that the amounts themselves will be published nearer the time. We have no estimates at all of what they will be. What sort of figures are we talking about?
I imagine that the Minister will tell us that the amount to be contributed at the secondary stage—that is, in 2009—cannot be announced yet because it is such a long way off. Our amendment proposes that the contribution from the Government at seven will be prescribed in regulation but will not be any less than the initial government contribution under Clause 8(1).
I imagine that many people will have their own views about the secondary amount to be contributed. We wish to raise the issue now with this probing amendment to ascertain the Minister's view on what sort of amount the Government envisage. The issue cropped up here and there during debate in another place, and again in our debates in Committee, but we have not yet had a hint from the Minister about what he envisages. Rumours were floating around of £50 at seven, with £100 as a supplementary, but there was no confirmation of that.
Our amendment would have the second instalment on a par with the first. That allows some flexibility because it does not insist on a specific amount. We know that the initial contributions under Clauses 8(1) and 9(2) can be changed from the £250 and £500 currently proposed by regulation and subject to affirmative procedure. We simply propose that the second contributions mirror the first, whatever those are, in 2009. They may not continue to be £250 and £500 as at present.
Our amendment is intended only to probe. If the Minister is unhappy with a second contribution equal to the initial one, perhaps he will allow a different
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percentage—perhaps half of the initial contribution. I believe it makes sense to specify the secondary contribution as a percentage of the first so that we all have some idea about what amounts we are talking about. This is not being prescriptive, but it is fleshing out the detail of the scheme as it moves into the future. I do not believe that this ties the hands of future governments. If there is a shortfall in money available. then both amounts will be reduced—the initial one and the secondary contribution. Where is the harm in having the same ratio between the two as a constant? I beg to move.
Lord Naseby: I rise briefly to support my noble friend. This amendment is absolutely hitting the nail on the head and prising out of the Government their current thoughts on the issue. It seems to me that Sandler's view—although I would not want to take his name in vain—is that there should be nothing. He does not believe in incentives to save. He says that they do not work. If he had his way, it would be nothing. That. of course, would be a travesty of the whole concept of child trust funds.
My noble friend's proposal that the percentage should be matched does not commit the Government to a specific figure. However, she is certainly seeking from the Minister a statement of commitment to the future of the child trust fund, rather than their treating it as a short-term measure. I do not believe that either the Minister or the Government are treating it as such. However, we await his response with great interest.
Lord McIntosh of Haringey: I do not know that I have anything much to add to what I said on virtually the same amendment earlier. I have exhausted myself and bored the Committee already on this subject.
Noble Lords: No!
Lord Naseby: The Minister may be exhausted, but he has certainly not bored any of us.
Lord McIntosh of Haringey: Surely the issue is very straightforward. Neither of the major political parties that support the Bill could afford to play fast and loose with it, even in 2009. There is a public commitment to a significant payment and to significant supplementary payments, and there is a public commitment—which is not on the face of the Bill except in the possibility of regulations—for further payments at age seven. It would be utterly inappropriate for us to commit future governments on the amount. We will be held to account by the people of this country, to put it pompously.
Baroness Wilcox: I have spoken to people about the proposition and the fact that we in the Conservative Party support it. When I say, "If your baby was born by the end of August 2002, you're going to get £250", that sounds good and quite exciting. Then I say, "At seven you'll get some more". "The same?", I am asked, to which I reply, "No". Then I am asked, "How much?", and I reply that we do not know. "What do

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you mean?", I am asked. "You know what you're going to give us now but not what you're going to give us when the child is seven? It seems very odd".
The Government cannot tell us that we should not seek some sort of certainty and expectation. If we are to encourage people to save—to look forward to the future—I would have thought that putting something in this area would have been a good idea. Our amendment would have been an awfully good idea and I wish the Government had taken it up. However, I see that the Minister is determined not to do so. At least I now know for certain that he will not do so and, as such, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 59 and 60 not moved.]
Clause 10 agreed to.
Clause 11 [Recouping Inland Revenue contributions]:
Baroness Wilcox moved Amendment No. 61:
Page 7, line 14, at end insert—
"( ) The circumstances referred to in subsection (1) shall not include any error or mistake which is attributable solely to acts or omissions of the Inland Revenue."
The noble Baroness said: In moving Amendment No. 61, I shall also speak to Amendment No. 62, both of which deal with the issue of Inland Revenue error. Clause 11 allows the Inland Revenue to recoup contributions made under Clauses 8, 9 and 10 in the almost limitless circumstances to be prescribed in the ubiquitous regulations. That is fine where the children's parents or an account provider have given incorrect information, but there could be other circumstances, for example, where the Inland Revenue has incorrectly interpreted whether the provisions in Clause 9 or the regulations yet to come under Clause 10 are met.
The purpose of the amendments is to probe whether the Inland Revenue should be able to recover money even where the only fault lay with the Inland Revenue—an entirely plausible scenario. Amendment No. 61 would not allow any recovery where the Inland Revenue's acts or omissions were solely to blame, while Amendment No. 62 would allow recovery of the capital amount but not any income or gains made in the interim. I beg to move.
Lord McIntosh of Haringey: I am tempted to see whether there are any bankers around and to ask whether banks do not attempt to recover any money that they have paid incorrectly. My understanding is that they do, quite reasonably.
The amendment would prevent the Revenue recovering a payment in a situation where it has made one into a child trust fund account in error. The amendment assumes that the provisions of Clause 11 are broad enough for the Revenue to recoup any payment, including money paid incorrectly by the Revenue, into an account. But our legal advice is that Clause 11(2) contains the assumption that payments should not have been made in the first place. Therefore the circumstances in which we are intending to use the power in Clause 11 are where fraud or negligence by the investor or the provider has been involved.
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But where an erroneous payment has been made by the Revenue, it will be recovered under the provisions of general law. This comes back to "Bank error in your favour. Collect £200". You do not. The Revenue would recover any excess payments, together with any income or gains which have arisen on those funds. Although the Revenue acts to eliminate errors, it is unrealistic to assume that they will not happen. Although we expect them to be rare, it is likely in a scheme of this size that payments could be made in error. It is only right in those circumstances that the money should be recovered.
In virtually all cases of such a nature, the payment and the income or gains arising from it will still be in the child trust fund account and will be recovered from the account. Not to recover money paid in error would be unfair to others and an improper use of government money. It would mean that children would benefit from funds to which they were not entitled, putting them in a better position than other children and, logically, putting the other children in a worse position.
5.30 p.m.
Baroness Wilcox: I thank the Minister for that response. I always like asking questions about the Inland Revenue, having run a business of my own and having come to the definite conclusion that, so far as the Inland Revenue is concerned, one is guilty until one can prove one's innocence. I have served on the board of the Inland Revenue, and seen how difficult life can be for it sometimes. I have also seen how much error is made. It seems to me that the Inland Revenue is in a win-win situation whereas the rest of us are not. For the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 62 and 63 not moved.]
Clause 11 agreed to.
Clause 12 [Subscription limits]:
Baroness Wilcox moved Amendment No. 64:
Page 7, line 20, at end insert "or marketable securities"
The noble Baroness said: Amendment No. 64 raises the question of why shares and securities may not be used when making contributions to a child trust fund. Clause 12(1) states that subscriptions to a child trust fund may be made only by way of a monetary contribution. Amendment No. 64 seeks to extend that to allow marketable securities.
I do not believe that all child trust fund providers should be compelled to take marketable securities but it would be a useful facility for some contributors to be able to transfer shares or other securities. The need to stick within the monetary limit as well as the practicality of running a child trust fund itself dictates that only marketable securities should be involved. I believe that the ISA rule allows for this and that it operates without difficulty.

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When this issue was discussed in Standing Committee in another place, the only substantive objection raised by the Financial Secretary was in relation to unlisted shares. My amendment avoids that pitfall. I beg to move.
Lord McIntosh of Haringey: The key to this is to keep the operation of child trust funds as simple as possible. After all, we have put a cap on the charges and we are talking about relatively small amounts of money, although of course it is all new business. If we were to allow for the acceptance of shares and other investments, even marketable securities, that would mean that a provider would have to arrange for a valuation. I admit that that is straightforward for quoted shares but the Revenue would have to agree a valuation for unquoted shares.
Valuation is not a simple process and it would be difficult for the provider to keep track of the annual limit. If the limit were exceeded once the valuation was agreed, either because it was higher than expected or because other contributions had been made to the account as well, contributions would need to be returned to whoever made them. That would incur additional administrative costs. Securities may not always remain marketable, and that also would add to costs.
There is another issue that needs to be considered in regard to the acceptance of non-monetary contributions: the stakeholder account is risk controlled and the provider is required to maintain a diverse portfolio of investments. In addition, as the account moves closer to maturity, the provider is required to move investments into lower risk areas. Accepting bundles of shares or gilts would be inconsistent with this approach and the value of shares and securities could easily be manipulated for avoidance purposes. If we were to allow contributions in the form of securities, we would need complex anti-avoidance rules specifically to prevent abuse. Again, that would increase the administrative burden and therefore the costs.
Providers are required to value child trust fund accounts annually. Non-monetary contributions would have to be valued not only once but every year. So the initial additional flexibility offered by the amendment would be outweighed by the extra administrative cost. A small minority of people might be disappointed that contributions of securities could not be accepted, but the reason for this is to keep account charges low.
The noble Baroness, Lady Wilcox, referred to ISAs. The transfer of securities into ISAs is allowed in very limited circumstances—that is, in transfers from employee share schemes only.
Lord Skelmersdale: Before my noble friend responds to that reply, can the Minister explain why there is a cap of £1.200 at all?
Lord McIntosh of Haringey: There has to be some sort of limit in order that the scheme is not another way of richer people investing on behalf of their children.
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We are setting a limit which is manageable in terms of tax foregone in return for a benefit for all children in this country.
Baroness Wilcox: I think that this is an opportunity missed. I was pleased and delighted at the speed with which the officials were able to provide the Minister with the answer to the question about the IS.4 rules. What I said was right: the ISA rules allow for this and operate without difficulty. I am very sorry that we cannot even consider this proposal. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Wilcox moved Amendment No. 65:
Page 7, line 22, after "fund" insert "in respect of '
The noble Baroness said: This amendment—
Lord McIntosh of Haringey: This is the Skelmersdale amendment.
Baroness Wilcox: Is that so? I speak on behalf of myself and my noble friend Lord Skelmersdale to Amendment No. 65—but of course I am moving it on my own behalf. I shall speak also to the other amendments in the group, again tabled in my name. They all concern the maximum amount that can be contributed to a child trust fund.
Amendment No. 65 would insert a form of words into Clause 12(2) so that the maximum amount is an amount paid in respect of one year and not simply in a year. This would allow unused contribution limits in one year to be carried over to the following year.
Not all parents can contribute the same amount every year. Perhaps a parent has a period of unemployment or the family has other financial commitments. However, when funds are more plentiful in following years, parents would like to make up the contributions that were missed. If the Government are serious about encouraging savings through the medium of the child trust fund, this amendment would allow a more diverse set of saving patterns to emerge.
Amendment No. 66 is a probing amendment to establish the Government's intentions as regards the maximum contribution. We have heard the Minister's reply on that. This is set at £1,200 in the draft regulations. My amendment would ensure that later regulations could not reduce that amount. The Minister will be aware that the reduction in the annual ISA contribution limit has been much criticised. It would be odd if this new vehicle, one designed to increase savings, was also savaged in that way. People need to be reassured that the Government will be consistent in their approach.
Amendment No. 67 is a variation on that theme as it requires the regulations to provide for the annual uprating of the contribution limit by the rate of inflation. My amendment uses the retail prices index, but to be trendy I should have used the consumer prices index. However, that seems likely to produce a considerably lower figure at all times.

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Finally, I turn to Amendment No. 70. This is a probing amendment to clarify whether amounts paid under the terms of Clauses 9 and 10 could be construed as contributions, thus restricting the amounts capable of being contributed by parents and others. I hope that the Minister can reassure me on this point. I beg to move.
Lord Skelmersdale: For the avoidance of doubt, none of these amendments is a Skelmersdale amendment.
Lord McIntosh of Haringey: I was teasing. The noble Lord, Lord Skelmersdale, raised the issue of why there should be a limit of £1,200 and these amendments concern that limit, although I acknowledge that they have a different thrust.
It is important to the concept of the child trust fund that family, friends, or children themselves can make additional contributions to the fund. As has been said, if no additional contributions are made, after 18 years the fund is likely to be in three figures rather than a more significant amount.
The purpose of the government endowments is to encourage people to save for a child's future. Additional savings by family and friends could significantly increase the amount that children receive at the age of 18. The fund intends to encourage a partnership between government and families to build on existing positive attitudes to saving for children.
However, we believe it unwise to put rules into the Bill—such as the subscription limit not falling below £1,200, as proposed in Amendment No. 66, and increasing with RPI, as proposed in Amendment No. 67—rather than give future governments full flexibility to manage the child trust fund in the light of future developments, needs and opportunities. This subscription limit must be kept under review in light of the progress of the child trust fund.
A further amendment in this group, Amendment No. 70, is unnecessary as it seeks to ensure that the government contributions will not count towards the maximum subscription limit. That has already been specified in the regulations, which have been published.
We are not certain about the reason for Amendment No. 65. We assume that, by inserting "in respect of" into Clause 12, the amendment would allow unused contributions from one year to be carried forward to the next. I am afraid that that would make the fund more complicated for providers to administer, and difficult for child trust fund account holders and their families to get to grips with. There would have to be enhancements to the IT systems, which might not be popular with providers, especially small ones who are dealing with more modest savers. Such providers believe that a regular annual limit on a simple basis encourages regular saving and provides well for the modest contributor who will form the vast majority in child trust funds.
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To return to the thrust of the other amendments, my argument about flexibility for future governments is unchanged from that which I made in relation to previous amendments.
Lord Naseby: This provision discriminates against children. The Minister will be aware of government index-linked gilts. The Government recognise that people in the professional financial world buy index-linked gilts because they act as a hedge against inflation going up. Furthermore, National Savings offers index-linked products. As I understand it, the Minister is saying, "That's all very well for people who buy those securities, but our country's children will not have anything that protects them against inflation. The maximum limit will be fixed at £1,200, and that is it. The children themselves, a couple of years down the track, will be limited to £1,200, as well as those starting in April 2005".
If that is the Government's philosophy, it is strange because they upgraded the original £250 for those born after September 2002. There is a certain inconsistency in the Government's approach and we should reconsider the matter on Report. All governments want flexibility, but the nation's children are the last people who should be used in such a way.
Lord McIntosh of Haringey: That is not the Government's philosophy and we are not imposing any restriction of that kind. We are simply saying that future governments will decide the limit. The noble Lord, Lord Naseby, is making a false analogy with index-linked gilts and so forth. Of course, the terms on which people are lent money survive throughout the period of the loan, but this is nothing to do with lending someone money. This provision limits how much can be invested. When the investment is made, normal financial conditions will apply to the interest.
Baroness Wilcox: I am sorry that we will not get close to what we sought to achieve with Amendment No. 66, because of the disappointment that ISAs have been and the worry that surrounds them. The Minister mentioned "flexibility" again and again in relation to how much the second-stage payment would be and he said that flexibility was required so that governments of whatever kind in the future would not be bound, yet there seems to be no flexibility of any other kind in this discussion. This takes me back to the days when I was chairman of the National Consumer Council: this is a classic case of something being process-driven and not consumer-led. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 66 to 68 not moved.]
[The Sitting was suspended for a Division in the House from 5.44 to 5.54 p.m.]
Baroness Wilcox moved Amendment No. 69:
Page 7, line 24, at end insert—
"( ) Regulations under this section may prescribe the methods by which subscriptions to a child trust fund may be made but such regulations may not require an account provider to accept subscriptions by way of cash, credit card or debit card."
The noble Baroness said: Amendment 69 would restrict the regulations under Clause 11 on the methods of payment into a child trust fund so that they may not require the account provider to accept cash, credit card or debit card. The draft regulations which define a stakeholder account require the account provider to accept all of those methods as well as cheques, direct debits, standing orders or direct credits. Fortunately, those restrictions do not appear to apply to non-stakeholder accounts, which the account provider may also offer—perhaps the Minister would confirm that.
The potential providers of stakeholder child trust funds will have to live within the charge cap of 1.5 per cent, which we have already debated. If a provider had to accept all the methods of payment listed in the schedule to the regulations, it would find it very difficult to make money. For example, credit card commissions will exceed 1.5 per cent. Some providers are also concerned about the administration costs of dealing with cheques or standing orders, although I have not included these for the purposes of today's debate.
The amendment also states that cash must not be prescribed. Cash handling will doubtless provide no problem for those organisations with an existing infrastructure, such as building societies. But others, such as the Children's Mutual, do not have that infrastructure. That may drive providers out of the market by itself. Those who look at what it will cost them to make arrangements to take cash themselves or through agencies may conclude that the costs are prohibitive within the 1.5 per cent cap.
I have a technical point to put to the Minister. Concern has been expressed that the FSA's client money regulations will not allow independent financial advisers to offer child trust funds to their clients. Will the Minister comment on that?
A better amendment would be to leave providers free to say what payment methods they want to provide, but for today's debate I have not been so radical or, perhaps I should say, so sensible. I beg to move.
6 p.m.
Lord McIntosh of Haringey: Perhaps I may help the Committee. I do not want to curtail debate—I do, actually, but that is not the point—but I should point out that we have been discussing these issues further with providers. We recognise the concerns expressed in the amendment. There have been persuasive arguments against providing the full range of the methods of payments. Current stakeholder pension regulations require cheque, direct debit, standing order and direct credit as methods of payment. We shall consider the industry's concerns and suggestions for keeping the CTS account regulations in line with stakeholder pension regulations.
Baroness Wilcox: I thank the Minister for that indication. I am delighted to know that discussions are continuing. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 70 not moved.]
Clause 12 agreed to.
Clauses 13 and 14 agreed to.
Baroness Wilcox moved Amendment No. 71:
Before Clause 15, insert the following new clause—
"ANNUAL REPORT
The Treasury shall lay before each House of Parliament every year a report on the operation of child trust funds, including—

(a) the amounts paid under sections 8, 9 and 10;

(b) the additional amounts paid into child truss funds under section 12;

(c) any practical difficulties that have been encountered by the Inland Revenue;

(d) the results of any research carried out into the effect of child trust funds on savings behaviour or any other matters."

The noble Baroness said: Amendment No. 71 seeks to insert a new clause before Clause 15. When we reach a clause asking for an annual report, we know that there is light at the end of the Committee tunnel, although this is not quite the final amendment.
The proposed new clause requires the Treasury to lay a report each year before the Houses of Parliament on how child trust funds are operating. There is very little evidence underpinning this policy. and the Government are setting no targets, for example, on the amount of savings the policy is expected to generate. My honourable friend in another place, Mr George Osborne, made a telling point in Standing Committee when he said that, if another department had come to the Treasury during the spending round and asked for £250 million a year for a policy underpinned by little research and unaccompanied by any output targets, it would be sent away with a flea in its ear.
Over time, problems may well emerge. One thing that concerns many of us is the potential dissipation of the proceeds of a child trust fund at its maturity. Providers have a number of concerns about how the stakeholder element will work in practice and how the voucher scheme will operate. There will be a need for basic data on how much is being contributed to child trust funds under the various routes for that. The Government say that they are concerned about financial education, but how will they measure that and report to Parliament?
The amendment asks for an annual report so that it can provide an opportunity for either House to debate the way in which the policy is unfolding. I hope that the Chancellor will be curious to find out what he is getting for his money. That may be a vain hope, but the rest of us want to know what we are getting for our money—because it is taxpayers' money that is being used, not the Government's or the Chancellor's.
I hope that the Minister, who is so enthusiastic about this policy, will welcome the opportunity to show each year how well it is going. I beg to move.
Lord Newby: I rise briefly to support this amendment. The part of the amendment that could be particularly valuable is subsection (b), covering,
"the additional amounts paid into child trust funds under section 12".
On the first day in Grand Committee we debated the question of varying the way in which the charge cap might operate to enable child trust funds to be marketed more efficiently and effectively than might otherwise be the case. An annual report on the lines proposed in the amendment would provide the means to cast an investigative light on how the additional payments are working.
Lord McIntosh of Haringey: I hope that I can do better than the amendment by offering more. The new clause focuses on limited aspects of the child trust fund: the level of savings into the account; practical difficulties encountered by the Inland Revenue; the results of research carried out on savings behaviour and other matters. We are also concerned with helping people to understand the benefits of saving and investing, encouraging the saving of even small amounts, ensuring that in future all children have a financial asset at the start of adult life, and building on financial education to help people make better financial choices throughout their lives. All these are matters that Parliament ought to know about.
Most of the information asked for here will be available on the Internet. The Division Bell has sounded. I do not think that I will be able to finish my remarks.
The Chairman of Committees (Lord Brabazon of Tara): In that case I shall stop the noble Lord in mid flow. We shall return to this matter at a quarter past six.
[The Sitting was suspended for a Division in the House from 6.6 p.m. to 6.15 p.m.]
Lord McIntosh of Haringey: I started by saying that I hoped we could do better than the amendment does and pointed out the other things on which we ought to report. We shall report in two ways. First, we will publish annual statistics for the child trust fund, from 2007 onwards. The statistics will provide more information than is being sought here. They will include the level of take-up of the child trust fund; the number of revenue-allocated accounts; the level of assets accumulating in the accounts; and, in due course, the income distribution across which contributions are made.
We are also developing a detailed evaluation plan identifying key success criteria associated with the policy objectives. Those might include, for example: parents' understanding of the child trust fund and how it works; the number of cash deposits in equity-based accounts; the extent to which it has increased savings for children compared with now and in the longer term; and the level of financial awareness among children and parents.
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The amendment is less ambitious than what we propose. I hope that it will be withdrawn.
Lord Naseby: That all sounds very fine, but will all the information be put into one annual report? It was not made clear.
Lord McIntosh of Haringey: No, we will publish annual statistics, but the evaluation that we are talking about could take place at irregular intervals. I am sure that something will be published each year, but, in order to get a proper evaluation, one must look at things over a period. I would not like to be tied down by frequency of publication, except in the sense of annual statistics.
Lord Naseby: I am most grateful to the Minister for giving way. He is quite right; it is quite difficult to tie him down. Would it not be normal for evaluation to be left to the National Audit Office? That is the area in which one expects an independent body to carry out an evaluation. I sat for some 10 years on the Public Accounts Committee, which analyses the government policy of the day and reports impartially. The Minister raises two issues. The first is the annual statistics. If he thinks further about what my noble friend says, I think that he will be tempted to pull all that information together into an annual report. Secondly, there is the separate issue of evaluation of the policy. With the greatest respect to any political party—it applies to my own above any of us—we would all prefer the National Audit Office to evaluate the policy.
Lord McIntosh of Haringey: That is indeed a nonpolitical point. I think that the Comptroller and Auditor General would say that there are too many occasions when his staff are occupied in finding out why things have gone wrong. We are concerned to keep adequate records and to interpret and analyse them in such a way as to make it unnecessary for the National Audit Office to look at things that have gone wrong. Of course the National Audit Office is always free to investigate anything that it wishes. Nothing that we do would make that less possible.
Lord Naseby: I am grateful to the Minister for giving way once again. It is not a question of what the National Audit Office and the Comptroller and Auditor General wishes; it is laid down in statute that they must audit the accounts, so it is not an option. The Minister may wish to think about the matter further. I accept that we have not discussed the matter in any detail. He may want to return on Report when he has clarified his own mind on the matter.
Lord McIntosh of Haringey: I am sorry; there has been a misunderstanding. Of course there will be an audit of the fund every year—nothing takes away from that. I am talking about going further, as the amendment would, by looking at the reasons that things happen. That is in addition to the audit function of the National Audit Office. I assumed that the noble Lord was talking about its value-for-money studies.
Baroness Wilcox: I hear what the Minister says about all the checks and balances that will take place,

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but we have said many times that the initiative is new and different. An annual report would give the Government a way of celebrating, educating and bringing matters together. That would be novel and it is a missed opportunity, but that is for the Government to decide. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 15 [Information from account providers etc.]:
Baroness Wilcox moved Amendment No. 72:
Page 9, line 2, at end insert "but the regulations may not require the provision of information by account providers more frequently than monthly"
The noble Baroness said: Amendment No. 72 adds to Clause 15, which deals with information from account providers, the requirement that information must not be required more frequently than monthly. The draft regulations require providers to put in claim and financial returns fortnightly. The Association of British Insurers has described that as "excessively bureaucratic". It has pointed out that the draft regulations do not require fortnightly but bi-monthly returns, which may well be difficult to achieve with existing IT systems. In total, the draft regulations require 61 separate returns, which the ABI believes should be streamlined to 12 integrated monthly returns and possibly an annual one in addition.
I know that the Government have argued that the so-called fortnightly returns will speed up the crediting of government contributions to the child trust funds and thus maximise the returns. This is probably de minimis, but in any event the ABI tells us that many providers will credit the voucher as soon as they receive it, as insurers currently do for life assurance premium relief.
I hope that the Government will be prepared to look again at the administrative burden on the providers. A point will come at which the camel's back will be broken and the Government should listen to those real concerns from providers if they wish to see a significant number enter the child trust fund market. I beg to move.
Lord McIntosh of Haringey: The noble Baroness, Lady Wilcox, says that the Government argue that the fortnightly returns will speed up the money for an account—indeed, we do argue that. What happens is that the information is provided, the account is opened—please pay. If the money is paid in straight away or on a fortnightly basis, interest starts to be accrued from that date. I am glad to hear of the ABI's comments about paying the money in straight away, but that is not a legal requirement, as I understand it.
The amendment says that the regulations may not require providers to provide the Inland Revenue with information more frequently than monthly. The noble Baroness. Lady Wilcox, made clear that it refers to the draft regulations, which we published on 2 February. It does not work in that sense, because several other clauses in the Bill impact in this area—for example Clause 5(5)(b) allows for regulations requiring the provider to inform the Revenue when an account is
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opened using a voucher. The amendment would not prevent fortnightly returns, but would remove some of the important information we need from those returns.
Our intention is that providers should notify the Revenue within two weeks of opening an account, and of other important changes in the account. such as if the account has been closed or has been transferred to another provider. The reason for the two-week period rather than longer is that we want to put the money into the child's account as quickly as is practicable once the parents have decided which CTF provider's account to open, so that the child can gain maximum growth from it.
The fortnightly exchange of information will be via the Internet and that will be an automated process with very little human intervention. There will be a specified electronic format that will encrypt information and use a password that is specific to the provider. If the provider's return is correct, the Government contributions will be paid automatically to the relevant account. If the provider's return is incorrect it will be automatically returned to the provider to rectify.
As it is an automated process, it is not envisaged that fortnightly reporting will add significantly to the workload of providers and it will enable Government contributions to reach CTFs at the earliest possible time.
Lord Naseby: I do not disagree with what the Minister said, but does that mean that there will be 26 returns a year?
Lord McIntosh of Haringey: Yes.
Baroness Wilcox: Fortnightly seems onerous, and I am interested to hear that payments would be made via the Internet. There is the electronic application about which we started to talk as early as Amendment No. 31.
Lord McIntosh of Haringey: But if the noble Baroness will permit me to say so, we are talking about a return between the Government and the provider. It is not for the parent.
Baroness Wilcox: I fully understand exactly what the Minister is saying, but it is nice to hear him use the words "via the Internet". However, I am sorry that the process is fortnightly, which seems onerous. If anything, it will prevent people entering the child trust fund market. We do not want to limit it if we can avoid it; I am sure that the Minister does not either. For the moment, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 15 shall stand part of the Bill?
Lord Naseby: I apologise to the Minister for not giving him prior knowledge that I would speak on clause stand part; I am not even sure that my comments come at exactly the right place in the Bill. However, I am concerned about what happens to children whose parents divorce, or one partner dies

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and the parent remarries, when the child wants to change their name. Then it happens again and they want to change their name again, and they then may want to change it back to what it originally was. It is an experience that some of my noble friends have when they change their names on arriving in the House. It is at best tedious, and often very lengthy. Is there a process on the information from account providers that simplifies the whole issue?
Lord McIntosh of Haringey: I rather think that I shall have to write to the noble Lord on that point. I am sure that there is.
Clause 15 agreed to.
Clause 16 agreed to.
Clause 17 [Use of information]:
Baroness Wilcox moved Amendment No. 73:
Page 9, line 34, leave out subsection (2).
The noble Baroness said: I shall speak to Amendments Nos. 73 and 74. In order for the system of CTFs proposed by the Bill to work well, the Inland Revenue needs the power given to it in Clause 15 to require information and documentation from any relevant person—that is, those responsible for a CTF and the account providers. Those details are to be contained in regulations. Our concerns, however, centre round Clause 17, which makes provision for the use to which that information, once gathered, can be used.
Subsection (1) states that the information held by the Revenue,
"may be used, or supplied to any person providing services to the Inland Revenue, for the purposes of, or for any purposes connected with, the exercise of",
functions relating to CTFs. That is all well and good—there needs to be effective interaction between all parties who work together and co-operate to allow CTF schemes to work.
We are concerned about subsections (2) and (3), however. Subsection (2) would allow information held by the Inland Revenue or by a person providing services to it, for any purpose relating to CTFs, to be used or supplied to any person providing any services whatever to it for the exercise of any other function which it undertakes. Subsection (3) would do the opposite and allow any information held by the Inland Revenue, for any other purpose unconnected with CTFs, to be used and supplied to it or to any person providing services to it to exercise its functions regarding CTFs.
Our amendments leave out subsections (2) and (3) on a probing basis. The powers are broad-ranging. I do not doubt that the intention of the Government is to encourage co-operation between different departments within the Inland Revenue. Mention has been made of the need to allow a third party to collate statistical data to examine how well the scheme is working. That might require sharing of personal information about CTFs. We have also heard mention of sharing information with IT contractors and so on. However, that is not what the Bill currently says—it
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says that any information which the Inland Revenue has acquired in the process of administering CTFs can be shared with any third party, not for purposes connected with the exercise of the Inland Revenue's functions within this Bill, but for an altogether different purpose.
I am always wary of the issue of data protection. Personal information should not be shared unless it is strictly necessary for the purpose of administering CTFs. That is already covered by Clause 17(1). Can the Minister explain how he justifies extending this information sharing to parties unconnected with CTFs? The powers currently set out in subsections (2) and (3) are broad. We would feel happier if the regulations provided for the circumstances in which information could be made available by the Inland Revenue to other Inland Revenue departments and outside providers not directly related to CTFs. As it is, the Bill gives a free rein without any of the specific examples to which the Minister in another place referred. I beg to move.
6.30 p.m.
Lord McIntosh of Haringey: I think that we are at cross purposes. It may be the wording of the clause that is causing the trouble. The phrase "person providing services" is the key. The person providing services referred to in the Bill is always the IT contractor—and only the IT contractor. There is nothing in the clause that means that information will be shared with anyone else who conceivably might have an interest.
What is largely meant by information sharing is enabling computer systems and databases to talk to each other so that information held in one part of government can be used by another. There is plenty of precedent here. It is a standard provision that formalises for new work taken on by the Inland Revenue the existing convention that information received by the Inland Revenue for one purpose can be used for other purposes. We have the same provision, for example, in the new tax credits legislation.
The first amendment proposes that subsection (2) be left out. If accepted, it would not be possible, for instance, for the Inland Revenue to use information about child trust funds for evidence-based policy making. For example, we would not be able to produce the annual report, which the noble Baroness, Lady Wilcox, wanted in the previous amendment. As part of the evaluation of child trust funds, it might be worthwhile to follow a particular group of children and show how their child trust funds develop. We might want to consider differences in the use of child trust funds between children who start work at age 16 and those who go on to higher education If we left out subsection (2), we would not be able to do that.
Subsection (3) allows the Revenue to use information held for other purposes for the child trust fund. It allows the award of child benefit to be used to determine eligibility for child trust funds and details of child tax credit awards to be used in assessing whether a child is eligible for the higher rate of government

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endowment. I hope that it will be seen that these subsections are both quite restrictive and absolutely essential to the operation of the child trust fund.
Lord MacGregor of Pulham Market: I am sorry that 1 was unable to be present earlier in the debate. I intended to ask the Minister if he could indicate precedence for this, which he has just done. However, one point arises from his response. While I fully accept the need for a clause along these lines, the Minister said that subsection (2) would be applied only for IT services. But that is not what the Bill states. It uses the words, "supplied to any person". Is the normal precedent "to any person" when it is meant to be confined to particular services?
Lord McIntosh of Haringey: The phrase is "any person providing services". My advice is that that is to be interpreted as IT contractors and no one else. It sounds counter-intuitive to me as well, but I think that there is precedent for it.
Lord MacGregor of Pulham Market: I am sure that stationers supply services to the Inland Revenue. Probably caterers also supply services. The Minister says that his interpretation is correct, but it seems a very broad phrase indeed.
Lord McIntosh of Haringey: When I read it, it sounds broad as well. I shall write to everyone concerned about this.
Baroness Wilcox: I thank the Minister for that. These were probing amendments, and we have had a useful debate. I should be grateful if the Minister would write to us on the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 74 not moved.]
Clause 17 agreed to.
Clause 18 agreed to.
Clause 19 [Payments after death of child]:
Baroness Wilcox moved Amendment No. 75:
Page 11, line 3, leave out "may" and insert "shall"
The noble Baroness said: Amendment No. 75 is also probing. Clause 19 states that the Inland Revenue "may" make a payment to the personal representatives of the child. This concerns child trust fund contributions that had not been paid over before a child's death.
The amendment seeks to ascertain why, if the conditions in subsection (3) have been met, the Inland Revenue should have any discretion as to this payment. The issue was debated a little in Standing Committee in another place, where the only example given was of a parent who had murdered the child. I want to challenge that. The clause requires a payment to be made to the child's personal representatives, not the parents. I may be mistaken, but if a parent has murdered a child, he or she would not be eligible to receive anything from the child's estate, so the fact that the child had been murdered should not be relevant. In
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any event, it is not something that the Inland Revenue should opine upon, as it is a matter for the criminal law.
So I return to the basic question of why discretion has been given to the Inland Revenue, and on what basis it intends to exercise it. The Minister will see that this is not the usual "may" or "shall" debate, but raises issues of real substance. I beg to move.
Lord McIntosh of Haringey: Clause 19 is quite specific. The amendment is concerned with cases where the child dies. In such circumstances, the child trust fund will form part of the child's estate and be passed to personal representatives. Clause 19 deals with cases where children die before the Inland Revenue has made child trust fund payments which would be otherwise due. It also deals with cases where a child trust fund payment has been paid but has not been credited to an account before the death of the child.
There will be no need for parents to make an additional claim to receive any outstanding payments due. These will be sent to the parents automatically, accompanied by an appropriate letter.
In case the noble Baroness, Lady Wilcox, or others think that this may be restrictive, it may help if I explain why the Inland Revenue will make payments to personal representatives only if the child benefit has been claimed. Where they so wish, parents can claim child benefit even though a child has died. Child benefit is paid for eight weeks in those circumstances. I understand the circumstances in which some parents do not wish to do so; I also understand that some parents wish to occupy their minds in sad circumstances by seeing to it that they get for their children the rights that they have. Where parents do not claim the child benefit, I think it is wise to assume that they do not wish to be contacted to have their eligibility assessed. We believe that that is the least intrusive approach.
The amendment refers to subsection ( 1 ) of Clause 19, which states that the Inland Revenue "may" make a payment after the death of the child to personal representatives. The clause stops short of saying that a payment "shall" be made. That provides the Revenue with the power not to make a payment if it would be inappropriate to do so—in other words, if it appears that communication would be intrusive.
Turning to the issue of murder, personal representatives responsible for the unlawful death of a child would not receive a child trust fund payment. In practice, the Revenue would wait until another personal representative was able to receive the money. In these difficult circumstances, it is best to include that degree of discretion.
Baroness Wilcox: I said that it was a probing amendment, and it is. I thank the Minister for his reply. I have nothing more to say at this stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Wilcox moved Amendment No. 76:
Page line 4. after "representatives" insert "or executors"
The noble Baroness said: Finally, I rise to speak to Amendments Nos. 76 and 92, unless I respond to the government amendment which follows.
We are drawing to the close of our discussions in Grand Committee. Clause 19 deals with payments made by the Inland Revenue after the death of a child. Subsection (1) states:
"Where a relevant child dies, the Inland Revenue may make a payment to the personal representatives of the child".
Amendment No 76 is a strictly technical amendment. We have been advised by the Law Society for Scotland that Clause 19 does not make correct reference to the Scottish terminology for personal representatives. As the Bill is intended to extend to Scotland, the term "executor" should be used in addition to "personal representatives" to avoid causing any possible confusion to those in Scotland affected by the legislation.
Amendment No. 92 has a slightly different focus. It would provide for a regulation to enable sums of money to be paid into a deceased child's trust fund without requiring the confirmation of a personal representative or executor. This amendment was also recommended to us by the Law Society for Scotland. I am not sure whether the drafting is correct, but there is a significant point to be made here, so it will serve its purpose at this stage.
Clause 19 enables any payments that the Inland Revenue should have made to the child trust fund before the child dies to be paid to the child's personal representatives. It is quite possible that the sums to be paid into the child trust fund are unlikely to exceed £1,000. On the basis that this claim would normally be the only asset of the estate, apart from any money already paid into the child trust fund, it would mean that the child's father, mother or sibling would require to be confirmed as executor under the small estates procedure.
Where other payments are due by the Government to a deceased person at the time of death, there are government regulations enabling the particular government office to release moneys under, for example, Section 5(1)(g) and (q) of the Social Security Administration Act 1992. Although Clause 28 provides for regulations to be made under the Bill, there does not appear to be any provision enabling a regulation to be made relating to payments due under Clause 19. This amendment seeks to address that omission. I beg to move.
Lord McIntosh of Haringey: I should love to find the Law Society for Scotland right, as the noble Baroness, Lady Wilcox, claimed when she introduced the first of their amendments, but I am advised that neither of these amendments is necessary.
Payments made under this clause will go to the deceased child's estate. "Personal representatives" is the conventional legal expression covering both executors and administrators on an intestacy. It applies throughout the United Kingdom.
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Amendment No. 92 seeks to amend Clause 28 so that regulations could be made allowing the parents of a deceased child to claim the child trust fund more simply than would normally be the case. I have already explained that child benefit claims will be the normal gateway to CTF, and this will be the case when children die early in life. Child benefit will act as a secure and clear pathway.
The Revenue has developed this procedure to handle these difficult issues sensitively and sympathetically. There is no need for further regulations.
Baroness Wilcox: I thank the Minister for that explanation and clarification. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 77 and 78 not moved.]
Clause 19 agreed to.
Clause 20 [Penalties]:
[Amendments Nos. 79 to 84 not moved.]
Clause 20 agreed to.
Clause 21 agreed to.
Clause 22 [Rights of appeal]:
[Amendments Nos. 85 and 86 not moved.]
Clause 22 agreed to.
Clause 23 [Exercise of rights of appeal]:
Lord McIntosh of Haringey moved Amendment No. 87:
Page 14, line 11, leave out "prescribed manner" and insert "manner prescribed by regulations"
The noble Lord said: This amendment seeks to insert in the wording of Clause 23 a phrase that has been accidentally omitted. Clause 23 relates to the appeals process. The Bill provides for appeals against decisions taken by the Inland Revenue. Appeals may be brought by account providers or the responsible person for the child and will be heard by the appeals service, which hears social security appeals including child benefit appeals.
Clause 23(1) states:
"Notice of an appeal under section 22 against a decision must be given to the Inland Revenue in the prescribed manner within the period of thirty days after the date on which notice of the decision was given".
The amendment clarifies the fact that the manner in which the appeals are to be made will be set out in regulation. I beg to move.
On Question, amendment agreed to.
Clause 23, as amended, agreed to.
Clauses 24 to 26 agreed to.
Clause 27 [Commencement]:
[Amendments Nos. 88 to 90 not moved.]
Clause 27 agreed to.
Clause 28 [Regulations and orders]:
[Amendments Nos. 91 and 92 not moved.]
Lord McIntosh of Haringey moved Amendments Nos. 93 and 94:
Page 16, line 29, at end insert—
"(4A) No regulations to which this subsection applies may be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, each House of Parliament.
(413) Subsection (4A) applies to—

(a) regulations under section 2(7) or 10(1) or (2), and

(b) regulations which prescribe an amount under section 8(1) or 9(2), other than the first regulations which do so."

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Page 16, line 32, after "is" insert "(unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament)"
On Question, amendments agreed to.
Clause 28, as amended, agreed to.
Clauses 29 to 31 agreed to.
Bill reported with amendments.
The Committee adjourned at twelve minutes before seven o'clock.