Child Trust Fund (Hansard, 9 May 2001)

§ Lord McIntosh of Haringey
My Lords, the Government announced on 26th April that they would consult on two new proposals to increase saving and asset ownership: the child trust fund and the saving gateway. The exact timing and cost of these policy proposals will depend on the results of the consultation process.

The Viscount of Oxfuird
My Lords, can the Minister tell the House whether income that accrues under either proposal will be subject to taxation? If not. how can it be fair to tax the savings of non-taxpayers, including pensioners and children who may have been bought privatisation shares by their parents, through the non-refundable stealth tax on dividend income introduced by the Chancellor?

§ Lord McIntosh of Haringey
My Lords, I thought that it would not be long before the Benches opposite moved from a debate on something which involved the transfer of money from government to people to their obsession with the transfer of money from people to government. The question of the tax status of the child trust fund and the saving gateway is one of the matters for consultation. Clearly, if there were to be tax relief for income under either or both of these measures the question would arise whether it became a regressive or progressive proposal in taxation terms. That is one of the matters which is being seriously considered.

§ Lord Naseby
My Lords, is the Minister aware that the expression "baby bond" is the registered trade mark of the Tunbridge Wells Equitable Friendly Society, of which I have the honour to be chairman? That is declared in the register. Is the noble Lord also aware that the primary work on this matter was done by the think tank IPPR, of which we were proud to be a co-sponsor? Is the Minister further aware that the friendly society movement, which has some 6 million members, looks forward to working with the Government to introduce the child trust fund and hopes that that movement will have a major role to play?

§ Lord McIntosh of Haringey
My Lords, I am particularly grateful for the last part of the noble Lord's question. I learnt only 10 minutes ago that he and his society had the prescience to register the expression "baby bond". My immediate conclusion was that they would begin to charge the Government for the use of that name. I am delighted to learn—I hope—that that is not the intention. But the main conclusion that I draw from the noble Lord's question is that we have some very valuable allies.

§ Lord Goodhart
My Lords, does the Minister agree that it would be better to divert this money into the cutting of tuition fees?

§ Lord McIntosh of Haringey
My Lords, the assumption of the noble Lord is very flattering to the Government. It is our intention that 50 per cent of young people in this country should benefit from higher education, but even when we achieve that target tuition fees would apply to no more than half of that 50 per cent. The proposals announced in April of this year apply to the whole population.

§ Lord Campbell of Alloway
My Lords, all this business about transfer of moneys this way and that does not make much sense. Is this not just a plain electoral gimmick?

§ Lord McIntosh of Haringey
My Lords, if governments could not make proposals for improvements in the welfare and happiness of the people of this country, that might be a serious question. There are still plenty of opportunities for us to continue making improvements of the kind that we have suggested.

§ Lord Saatchi
My Lords, is it not true to say that this baby bond is a fitting epitaph for a government who have always liked the idea of treating voters as babies? Perhaps the Minister will follow me in sonic baby arithmetic. There are 717,000 births roughly a year in this country. At £500 per head, this baby bond will cost the Government the sum of £350 million per year. Does the Minister accept that the Government have increased tax on voters by £28 billion per year? Therefore, the sum that the Government are so generously giving back amounts to just 1¼ per cent of the extra amount they have already taken in taxes. Does not the Minister think that even babies could see that coming?

§ Lord McIntosh of Haringey
My Lords, I am grateful for the preview of what will undoubtedly appear either on posters or on party election broadcasts for the Conservative Party. I am sure that the Chancellor of the Exchequer will be glad to have forewarning of the cutting edge of Conservative Party philosophy. In particular, the remarks about babies will go down very well.
The Conservative Front Bench and its Back-Benchers are showing the same predilection as was shown by the noble Viscount, Lord Oxfuird: that the only way to respond to a proposal to transfer money from government to the people is to change the subject. I notice that neither the Front Bench nor the Back Benches have recorded the fact that Mr Portillo said that he would not proceed with this project.

§ Earl Ferrers
My Lords, can the noble Lord explain why the Government feel that people cannot have babies without the Government paying them to do so?

§ Lord McIntosh of Haringey
My Lords, the Government do not feel that. They are not King Canutes. The urges which cause people to have babies will continue under any government.

§ Lord Blackwell
My Lords, can the Minister explain why the Government's support for the baby bond has not been matched by their support for the Opposition's proposal to fund pensions for young people? If the Government are to transfer money to individuals to try to encourage savings and self-sufficiency, would it not be more sensible to crystallise an existing liability on the state (for paying pensions) and to fund those rather than to create an additional liability on the state 18 years earlier?

§ Lord McIntosh of Haringey
My Lords, I find that a remarkable question. The Government have successfully introduced stakeholder pensions and are 1031 introducing second state pensions which are valuable for young people as well as those of other ages. The Government's record in supporting pensions for people not at present receiving them is outstanding.

The Viscount of Oxfuird
My Lords, will the Government agree that it would be more sensible if, instead of taking money away from non-taxpayers and then giving some of it back, they abolished tax on small savings altogether, as recommended by the party on this side of the House?

§ Lord McIntosh of Haringey
My Lords, that is about the third or fourth attempt to divert attention from the original Question to something quite different. We are aware that if the only benefit of what one noble Lord called "baby bonds" was tax relief, that would be regressive in personal taxation terms. That is why other things would have to be done, particularly in terms of the relationship with tax credits and with other forms of benefits, to ensure that the finalised proposals are not regressive but benefit the less well-off. The analysis of these matters is clear in the paper issued in April. I commend it to the noble Viscount.