§ Mr. George OsborneTo ask the Chancellor of the Exchequer what research has been carried out by the Treasury into the likely impact of the Child Trust Fund on attitudes to savings. [141704]
§ Ruth KellyThe Child Trust Fund is an initiative with multiple objectives
to help people understand the benefits of saving and investing;to encourage parents and children to develop the savings habit and engage with financial institutions;to ensure that in future all children have a financial asset at to start of adult life to invest in their futures; andto build on financial education to help people make better financial choices throughout their lives.The Government first consulted on the Child Trust Fund in "Saving and Assets for AH", published in April 2001. The Government received a large number of responses from a wide variety of sources, including financial services providers, consumer organisations, academics, charities and other interested parties. Respondents broadly supported the principles underlying the Child Trust Fund, as reported in the follow-up document "Delivering Savings & Assets", which was published in November 2001. Both of these documents are available on the Treasury website.
Recent surveys by non-Governmental organisations have also shown that the Child Trust Fund is likely to be a popular initiative with families and has the potential to improve attitudes towards savings.
§ Mr. George OsborneTo ask the Chancellor of the Exchequer if he will estimate the impact of the Child Trust Fund on the incomes of the(a)poorest quintile of 18-year-olds, (b) the richest quintile of 18-year-olds and (c) other quintiles. [141706]
§ Ruth KellyCTF funds are accessible on their holder's 18th birthday and they might have an impact on income at that point because of investment returns, or indirectly thanks to enabling young people to take up opportunities which enhance their incomes. The magnitude of the indirect impact on incomes would depend on a variety of factors.
It is not possible to give a definitive figure for the impact of the CTF on incomes of the identified groups.
§ Mr. George OsborneTo ask the Chancellor of the Exchequer what plans he has to extend aspects of the Child Trust Fund scheme to children born before 1 September 2002. [141708]
§ Ruth KellyEligibility for the Child Trust Fund is already back-dated from its expected launch date in April 2005 to 1 September 2002 to include as many children as possible in the school cohort being born at the time of the Budget 2003 CTF announcement.
There is already a wide range of savings and investments parents can make for older children. Extending particular aspects of the Child Trust Fund to children born before 1 September 2002 would create another savings product and the risk of confusion. Financial providers will also be in a position to respond to any demand for certain aspects of the Fund.
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§ Mr. George OsborneTo ask the Chancellor of the Exchequer what ethical restrictions will be placed on the kind of investments which Child Trust Funds can make. [141709]
§ Ruth KellyThe Government understand that people may object to certain types of accounts because of their ethical or religious beliefs. In recent years there has been a growth in 'ethical' investment funds and there is increasing interest in funds compliant with Islamic Shariah law.
The Government would welcome CTF providers including products which are compatible with ethical or religious beliefs. We are not proposing to prohibit investment in non-ethical funds—as this would be hard to police, and consumers will be able to exercise their choice.
§ Mr. George OsborneTo ask the Chancellor of the Exchequer whether matching funds available under the Savings Gateway will be provided for contributions to child trust funds. [141710]
§ Ruth KellyThe Saving Gateway is at the pilot stage and is being evaluated for its effect on savings behaviour. The final evaluation report is expected in February 2005 and an update will be provided following the pre-Budget report.
§ Mr. George OsborneTo ask the Chancellor of the Exchequer whether charges by child trust fund providers will be capped. [141711]
§ Ruth KellyA decision on the charge cap for the CTF will be announced shortly.
§ Mr. George OsborneTo ask the Chancellor of the Exchequer what the expected cost is to the Exchequer of child trust funds for each of the next 25 years. [141712]
§ Ruth KellyEstimates of the cost in the first three years were published in Budget 2003 and will be updated in the pre-Budget report. The bulk of the cost to the Exchequer consists of the Annually Managed Expenditure for the initial Government endowments, which varies with birth cohort size and is therefore expected to be relatively stable after 2005–06. Costs to the Exchequer due to the tax loss from the small proportion of savings that would otherwise have been in taxable savings vehicles are negligible in the initial years and may then rise slowly, until the first accounts mature in 18 years. After this the cost of the tax loss is expected to remain stable. Tax loss will be small or negligible compared to the costs of the endowments. Estimates are not available for the cost of any further Government contributions at age as the value of these has yet to be decided.
§ Mr. George OsborneTo ask the Chancellor of the Exchequer who will be responsible for regulating child trust funds. [141713]
§ Ruth KellyThe proposed arrangements build on the structure that operates effectively for ISAs.
CTF providers will be FSA authorised. The FSA ensures that all FSA—authorised firms are run in a prudent and financially sound way and regulates their business practices, including the sales process.
139WInland Revenue auditors will ensure that providers claim Government payments and tax relief correctly, building on the way ISAs are currently audited.
§ Mr. George OsborneTo ask the Chancellor of the Exchequer what the expected cost is of the planned information programme about child trust funds. [141714]
§ Ruth KellyOne of the key aims of the CTF is to improve financial literacy and help people make better financial choices throughout their life.
The Government has commissioned research into how best to communicate information about the CTF and the financial decisions involved, with a view to addressing the needs in particular of parents with little or no experience of savings and investment.
Until this research is completed and the information programme is fully specified and finalised, it is not possible to provide an exact figure for the expected cost of this programme, although it forms part of current forecasts of the overall Revenue implementation costs for the CTF.