HC Deb 05 February 2004 vol 417 cc1004-5W
John Barrett

To ask the Chancellor of the Exchequer (1) if he will make a statement on the reasons for the decision to have two different initial payment values into Child Trust Funds; [152644]

(2) what assessment he has made of the likelihood of Child Trust Funds discouraging teenage children from saving through other means; [152645]

(3) what targets his Department has set to encourage (a) low income, (b) middle income and (c) higher income families to make additional contributions to Child Trust Funds; [152722]

(4) what assessment he has made of the ability of families on low incomes to make additional top-up contributions into Child Trust Funds; [152723]

(5) if he will make it his policy to make an additional contribution into a Child Trust Fund when the child reaches 18 years of age on the condition that the accrued funds will be spent on educational facilities; [152724]

(6) whether the Government will make a contribution to a Child Trust Fund between the child's seventh and 18th birthday; and if he will make a statement. [152725]

Ruth Kelly

The objectives of the Child Trust Fund are toensure that in future all children have a financial asset at the start of adult life to invest in their futures; help people understand the benefits of saving and investing; encourage parents and children to develop the savings habit and engage with financial institutions; and build on financial education to help people make better financial choices throughout their lives.

All children will receive a Government endowment of £250 when their Child Trust Fund account is opened. Families on child tax credit, with an income below the threshold (currently £13,230) will receive an additional £250. The additional endowment for children in low income families will help give their Child Trust Fund accounts a good start and ensures that the Child Trust Fund is both a universal and progressive policy—helping to extend opportunity to all, while targeting support to those that are most in need. The Government have confirmed that there will be a further progressive payment at age seven. This structure provides a foundation on which the Government will build in future.

Financial information and education are key to helping people make better financial choices throughout their lives. The Government view Child Trust Fund holders as the best judge of what most meets their future needs. By enabling children to interact with their own savings and investment account, and accompanying this with financial education in schools, the Child Trust Fund will help young people to understand the advantages of saving. The Government will commission a range of teaching and learning materials to meet children's needs at different ages, moving towards guidance on possible uses of financial assets, including continuing to save, as the child grows into adulthood.

We do not believe that setting targets for saving in the Child Trust Fund would be helpful since it risks distorting savings priorities. Information and guidance accompanying the Child Trust Fund will encourage parents to consider their savings priorities—be that the repayment of any debt, the need for 'rainy day' savings they can access and/or longer-term savings for their child in the Child Trust Fund.

We are currently developing a monitoring and evaluation plan for the Child Trust Fund.

Research has shown that people on low incomes can and do save. Early findings on the Saving Gateway support this.