Orders of the Day — Child Trust Funds Bill

House of Commons, 13 May 2004.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

I inform the House that privilege is involved in Lords amendment No. 7. If the House agrees to the amendment, I will arrange for the necessary entry to be made in the Journal.

Clause 1 — Child Trust Funds

Ruth Kelly (Labour, Bolton West)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this, we may take Lords amendment No. 2.

Ruth Kelly (Labour, Bolton West)

Looked-after children include some of the most disadvantaged children in our society, and we are committed to ensuring that they are fully included in the child trust fund arrangements. Although the majority of looked-after children have someone with parental responsibility, some have no one with such responsibility who can give instructions on their behalf for their child trust fund accounts—for example, orphans with no legal guardians. There are also some circumstances in which it would be inappropriate for someone with parental responsibility to give instructions for the management of a child trust fund account of a looked-after child—for instance, when contact between a child and a parent had been terminated because of serious abuse.

I said in Committee in January that we were exploring the possibility of involving the Official Solicitor. The amendments are the result of that work. Without them, there would be no one to give new instructions to the account provider for child trust fund accounts until the children reached the age of 16, when they would be able to give instructions themselves. There are a number of good reasons why it is desirable to have someone who could do that, and could make relevant decisions. For example, a child's religious or ethical beliefs may not accord with the type of child trust fund account that he or she has, or with the type of investments used in the account. Alternatively, an account provider may be underperforming in investment terms compared with other providers, so a move to a different provider may be called for.

The amendments would allow the Official Solicitor to be appointed to manage the child trust fund accounts of such children. I urge the House to support them.

George Osborne (Conservative, Tatton)

It is good to be back at the Dispatch Box talking about this Bill—it brings back memories of cold, dark January days in Committee.

Before I deal with the detail of the amendments, I want to say something about timing, in which I think the Official Solicitor would also be interested. I hope that today will mark the Bill's last legislative hurdle—we must wait and see—but one major piece of the jigsaw is missing: a piece that is relevant to the Official Solicitor, and the new responsibilities that the Government want to give him or perhaps, in the future, her. It is, however, of greater interest to the providers. I have spoken to some of them in the past week, including the chief executive of one of the largest likely providers. What concerns them, and may concern the Official Solicitor, is the sales regime for child trust funds. That is the last major piece of the jigsaw.

We, and the providers, were told that the Financial Services Authority's consultation paper on the sales regime was due to be published by the end of April. This is the second delayed deadline since the end of last year. We are almost halfway through May, and there is still no sign of the paper. When does the Financial Secretary expect it to emerge? Will it have to go to her before being published? I am not sure what procedure will apply in her office.

Will the Financial Secretary confirm that when the paper is published, there will be a mandatory three-month consultation period in which people, perhaps including the Official Solicitor, will be able to make representations? If so, even if the paper were published this week, the consultation period would run until mid-August. That makes it extremely unlikely—and I am being generous here—that a decision on the sales regime would be made until the end of September. We are therefore very close to the deadline for getting the scheme up and running. The providers must start registering with the Inland Revenue by October or November, and from January they need to be in a position to accept applications from children born between September 2002 and April 2005.

That is a tight deadline. It was tight when we were discussing this in Committee and on Report, but it is even tighter now, and we still do not have the sales regime. That is causing considerable concern in the industry, and is relevant to the Official Solicitor's responsibilities. When I spoke to the Association of British Insurers this week, I was told:

"The lack of information on the sales regime hinders providers' ability to take an informed decision on market entry—for example, we don't know if the CTF will be covered by the Sandler sales process or not. Early announcement of the charge cap which will apply to the CTF was welcome, but without the details of the sales regime providers will have an incomplete picture with which to consider offering the CTF . . . the timing of the publication of information on the sales regime is, at the very least, unfortunate."

The ABI is one of the most important groups representing the financial services industry, and is obviously important to the success of child trust funds. Unlike the Liberal Democrats, the official Opposition have supported the Bill throughout its passage so far, and we want child trust funds to work; but we are becoming increasingly concerned about the tightness of the timetable. When we read in the press that large providers such as the Pru and Legal and General have decided not to offer child trust funds, it is clear that we must do all we can to make them as attractive as possible to other providers, given the Government's restrictive decisions on such matters as the charge cap. The sales regime will be crucial to that. Will it be complicated or straightforward? I hope the Financial Secretary will say something about it, because I think it will be of broader interest.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I am sorry to interrupt the hon. Gentleman, but we must try to keep the debate within the confines of the amendments. I hope he will not seek to persuade the Financial Secretary to respond to a broad Second Reading-type debate.

George Osborne (Conservative, Tatton)

I would not dream of doing so, Mr. Deputy Speaker.

I am sure that the Official Solicitor, Mr Laurence Oates, will follow our proceedings, because he will have to make some of these decisions. The Financial Secretary talked about his role in Committee, or at least hinted at it. In fact, it was a bit confusing at the time. As the Financial Secretary knows, I have a great deal of time for her. We have just been sparring against the big beasts of the political jungle together during Treasury questions—her against my right hon. Friend the Member for West Dorset (Mr. Letwin), the shadow Chancellor, and me against the Chancellor of the Exchequer. In Committee, however, she kept referring to the Solicitor-General rather than the Official Solicitor. Mr. Laurence Oates is not, as far as I am aware, the right hon. and learned Member for Camberwell and Peckham (Ms Harman), and I doubt that either he or she would have been too impressed. But I shall put that slip to one side.

In Committee, the Financial Secretary said she was considering giving the Official Solicitor some kind of role to act on behalf of children in care. Will she expand on that a little? In her speech today, she did no more touch on what may be a very significant issue, with which I shall deal in a moment.

Will the Official Solicitor be able to act in the circumstances suggested by the hon. Member for Yeovil (Mr. Laws) in the debate in Committee? Those of us who served on the Committee will remember his rather lengthy dissertation on the performance of the Japanese equity market.

David Laws (Liberal Democrat, Yeovil)

It was concise.

George Osborne (Conservative, Tatton)

That depends on the definition of "lengthy" and "concise". It might have been concise by the hon. Gentleman's standards, but it was lengthy by everyone else's.

The hon. Gentleman made the serious point that in future equities could seriously underperform because of a crisis or prolonged slump in the equity market. Under the Bill as drafted, some children in care for whom the Official Solicitor will be acting will be forced into having an equity-based child trust fund account—a stakeholder account. We also discussed that in Committee. The hon. Member for Yeovil asked who, in circumstances in which there had been a prolonged equity slump, would decide on behalf of those children in care that it would be a mistake to go on using equity accounts. At a time when every other child in the country would be going into other accounts, such as cash accounts, because their parents would be sensibly making the decision not to put their child's future nest egg into the equity market, children in care, who, as the Financial Secretary said, are among the most vulnerable in our society and often have the smallest financial assets, would continue to be pumped into those equity accounts.

Will the Official Solicitor be able to make a broad decision that, at some future point, all the children in care whom he is looking after will no longer have to have an equity-based child trust fund? That will be a huge decision for him to take, and that raises the question of whether Mr. Laurence Oates is qualified to make it. He is no doubt an extremely well qualified lawyer, but he is not a financial adviser. On what grounds is he qualified to make an investment decision on whether the account of a child in care is best invested in the equity market or the bond market? The Official Solicitor is not in a position to make a qualified judgment on that.

That brings me to a point that the Financial Secretary made in her brief remarks. She put to the House the possibility that there might be an underperforming account provider and that children would not therefore have their child trust fund accounts placed with that provider. Again, I am not sure whether the Official Solicitor is in a position to make a judgment on whether an account provider is underperforming. Who will decide that? Will it be the Official Solicitor's responsibility to gather information from all the various financial providers and then decide that because a certain provider is underperforming, he will not allow any child trust funds of children in care to be placed with it? On what grounds can he take that decision? He is not a financial adviser and does not have financial expertise. Will the Inland Revenue take the decision and make a recommendation to the Official Solicitor? Will the Official Solicitor then be required to accept that recommendation, or will he make a judgment on the Revenue's advice? The issues are complex, and if we are going to give the Official Solicitor this important role, we need more clarification than we have so far had on exactly what role he will have in those decisions.

Will the Official Solicitor have the power to remove accounts, or to decide not to place child trust funds with a particular provider? I remember from our discussions in Committee that the child trust funds for children in care will be allocated to providers on a rota basis. If a provider is underperforming, will it be taken off the rota, or will it still be awarded the account, only for the Official Solicitor almost immediately to remove the account from the provider?

Those are important decisions, and I do not think that the Government have offered a convincing explanation on them. When I looked at the House of Lords Hansard, I read that Lord MacIntosh of Haringey was even briefer than the Financial Secretary in his explanation. He merely said that the Official Solicitor could

"give instructions . . . regarding a child's trust fund account"—[Official Report, House of Lords, 18 March 2004; Vol. 659, c. GC176.]

in situations where it was deemed "necessary or desirable". There was no explanation of what exactly necessary or desirable meant.

Amendment No. 2 says that the Official Solicitor can act only for children under 16. Of course, the fact that children aged 16 and 17 are going to be able to manage their accounts is my single biggest achievement since becoming a Member of Parliament. I persuaded the Government to change their mind on that, so I am not going to suggest that they undo their fine work. I will go to my grave knowing that I have changed the course of our nation. However, many children in care are there because they have, unfortunately, disabilities—some physical, but others mental. It is not clear to me that every child of 16 with mental disabilities will be able to manage their child trust fund account, and that is more likely to be the case for some of the young people whom the Official Solicitor represents. What will be the position of such 16 and 17-year-olds, where the person acting for them is not a parent or relative, but the Official Solicitor? Will there be circumstances in which he will continue to manage the account when a child is 16 and 17, to make sure that they get the benefit of a child trust fund account at 18?

It seems strange that that age has been written into the legislation, with no explanation of what will happen. I suppose that that also applies to some children who are not being looked after by the Official Solicitor. Since the Government changed their mind on reducing the age from 18 to 16 in England, Wales and Northern Ireland, I have not seen what they propose to do with 16 and 17-year-olds who are not capable of managing their own accounts, or who they intend will act on behalf of those young people. However, that is of particular relevance to this debate because of the role of the Official Solicitor in the matter.

David Laws (Liberal Democrat, Yeovil)

I share the pleasure of the hon. Member for Tatton (Mr. Osborne) at getting back to the details of the Child Trust Funds Bill, which are almost fun in comparison with the Finance Bill that we are dealing with in Committee.

Of all the groups of amendments that we are debating today, this is the most important. I hope that you will therefore bear with me, Mr. Deputy Speaker, while I set out some of our concerns about the Government's amendments and their legislation in this area.

As the hon. Member for Tatton made clear, this was a major issue for debate in Committee. It was clear that the Government wanted, correctly and understandably, to ensure that children in care had access to child trust fund accounts and the Minister wanted to ensure that the accounts of children in care had as much upside potential in terms of asset growth as those of individuals not in care. However, we raised in Committee the question of what would happen if the moneys invested by the Government in the accounts of children in care were put into equity-based products, as appears to be their intention. What would happen if the equity market was performing extremely poorly, in a way to which parents might respond by withdrawing money from equity-based accounts and putting it into cash or bond accounts? Children who have their accounts managed by the Government acting in loco parentis might lose out and, in future, hold the Government to account for the poor performance of their investment.

The hon. Member for Tatton mentioned what I thought was rather a concise summary that I gave in Committee of the experience in other countries, including Japan, that have had long-term bear markets. It may be difficult to anticipate that happening in the current circumstances in the United Kingdom, where we are used to the stock market and equity prices rising over a long time, but even several months after we debated this issue, the stock indices in Japan are still around the 10,000 mark—almost as little as 25 per cent. of what they were. In other words, there has been a 70 to 75 per cent. decline in the Japanese stock market since 1987–88, when I left university, and that could happen in the United Kingdom.

No doubt the Minister could not envisage that happening on her watch, or that of the Chancellor of the Exchequer, but I imagine that even she could envisage it happening if a Conservative Government came back to power. Perhaps she can imagine a long-term bear market at that stage that would raise exactly the concerns that the hon. Member for Tatton described, with the Government merrily putting money into equity-based child trust fund accounts on behalf of children in care, but then discovering that those accounts were going down dramatically in value.

The question, therefore—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The hon. Gentleman sought my indulgence while he sketched the background to his remarks, but I have to tell him that, based on what I am now hearing, my indulgence is beginning to drain away.

David Laws (Liberal Democrat, Yeovil)

Then I have come to exactly the right point in my comments, Mr. Deputy Speaker, because I am now going to talk about the way in which the Government have sought to deal with the problem.

Initially, the Financial Secretary was unwilling to acknowledge that there was a problem. We had some fun in Committee, perhaps at my expense, with some of the points that I have just made. However, on 13 January she showed that she might be beginning to understand our concerns. She said:

"There are some quite difficult issues to resolve. We have been in consultation across Government about the best way to provide for children in care. I am determined to ensure that children in care have the maximum opportunity that we can offer them through this policy." —[Official Report, Standing Committee A, 13 January 2004; c. 100.]

She also undertook later in the debate to engage with the Official Solicitor and others to seek to clarify the Government's policy and deal with the risk of children in care being disadvantaged.

There was a further modest development of the policy on the Floor of the House on 3 February when the Financial Secretary said:

"We have not yet finalised the possible role of the Official Solicitor, with whom we are still negotiating, but I can confirm that we have discussed the need for the Official Solicitor to consider whether the account was performing poorly".

That was a major breakthrough in the Government's policy. She went on to say:

"The hon. Gentleman's concerns about an equity market slump or liquidity crisis that have driven him to make his many and varied comments would be the sorts of concerns that the Official Solicitor, if they were to accept that role, should consider".—[Official Report, 3 February 2004; Vol. 417, c. 713.]

The hon. Member for Tatton went on to refer to comments made in another place on 18 March, when Lord McIntosh spent what looks like less than a minute explaining the policy that led to the Lords amendments being tabled. He summed up by saying:

"I hope the Committee will feel that this is an uncontroversial addition to the existing provisions".—[Official Report, House of Lords, 18 March 2004; Vol. 659, c. GC176.]

There seemed to be no debate on the issue, which is a pity.

This may be an uncontroversial move by the Government in the sense that they are trying to deal with the problems that we discussed in Committee, but as the hon. Member for Tatton said, there are some major questions about whether their well-meaning intentions in tabling the amendments have been properly thought through. We need answers to a number of questions from the Financial Secretary and I hope that she will be able to give them today.

I shall run through some of the major questions that arise from the suggestion that the Official Solicitor—who, so far as I am aware, has no particular market expertise—will act as some kind of investment adviser, presumably unpaid, to children in care for whom the Government act in loco parentis.

First, will the Official Solicitor have the option of opening accounts that are not equity-based, such as cash-based accounts? The Minister has said in Committee and elsewhere that she wants all the accounts for children in care to be equity-based stakeholder accounts. I understand her desire to ensure that children in care can benefit from any buoyancy in the stock market compared with cash-based accounts or bond-based markets, but does she acknowledge that, in some circumstances, the Official Solicitor might not want to open equity-based stakeholder accounts, but cash or bond-based accounts instead? Will that be possible?

Secondly, will the Official Solicitor be able to move money out of equity-based accounts that have been opened for children and put it in cash accounts if he thinks that that would be sensible in the prevailing market conditions? Will he be able to do that the other way round and turn a cash-based account into an equity-based one?

How will the Official Solicitor make those judgments? In my earlier career, I worked in the financial markets for quite a long time. I can tell the Minister that, when markets go down a long way, it is easy for people to panic and, having believed that markets were about to reverse themselves, eventually change their minds—often at the lowest point of the market—and switch into other assets, only to discover that the market then goes back up.

How will the Official Solicitor make judgments about market conditions and investment rates and how will he assess the performance of the accounts that he is considering switching in and out of? Will he be advised by some other body within Government, the Financial Services Authority, the Treasury, or some other organisation, before making those important decisions?

What legal recourse will there be for children whose accounts are managed in that way if the Official Solicitor gets it wrong? What will happen at the age of 18, or even 16, when a child looks back on the experience of having his or her account managed by the Official Solicitor, only to discover that, every time the equity markets plunged, he had worried terribly that he would be criticised for inactivity and had switched all the money out of equity into bonds at the low point in the market, that the market had then rallied, the Official Solicitor had switched into gilts and that gilts then declined? The Official Solicitor is not necessarily financially trained and one can imagine that he could make an utter hash of the job. What would stop the children involved seeking legal recourse for the losses that they had sustained?

Will there be any restriction on the Official Solicitor's freedom to move money in and out of accounts, or will his powers be as strong or as weak as those of a parent managing their own children's trust fund accounts? In other words, will the Official Solicitor act fully in loco parentis or will he be restricted in comparison with parents? Is there a memorandum of understanding between the Official Solicitor and the Treasury, setting out the terms on which the Official Solicitor will take such difficult decisions? If so, will it be published so that we can see the terms and put pressure on the Government to change them if they are wrong?

Finally, as the hon. Member for Tatton asked, what are the implications of the fact that the Official Solicitor can, essentially, pull the plug on a financial provider that appears to be doing a bad job with its investment accounts? What are the implications of the Official Solicitor moving—presumably all—the accounts in the name of that financial provider out of the provider's name and into that of another? Presumably, if there were concerns about how a particular provider was managing such accounts, the Official Solicitor might move a whole swathe of accounts at the same time. What signal would that send to the financial markets about that provider's competence? In those circumstances, would it not be very difficult for the Official Solicitor to take such action? He or she would be regarded as almost censuring a financial market body as a consequence of its incompetence. Essentially, that would amount to a vote of no confidence in that provider.

George Osborne (Conservative, Tatton)

The hon. Gentleman is developing a crucial point. Has he considered the possibility whereby the Inland Revenue thinks that the provider is up to the job and continues to award child trust funds to it, but the Official Solicitor takes the view that it is not up to the job? That would lead to real confusion.

David Laws (Liberal Democrat, Yeovil)

The hon. Gentleman is right and highlights another risk that needs to be debated and considered carefully, in the Government's own interests, before such legislation and regulations are finalised.

I hope that the Financial Secretary does not feel that I am being ungrateful. I appreciate that the amendments are a step towards addressing the concerns that we raised in Committee, but we are sceptical as to whether the Official Solicitor can do the job alone. The Government are placing too much responsibility on the Official Solicitor in respect of areas in which he or she might not be competent. We want to be reassured that the Official Solicitor will not be expected to do this job alone. At the very least, the FSA, Her Majesty's Treasury or some other part of government must surely have a role to play in advising the Official Solicitor. I hope that we hear from the Government on that point and that we can engage constructively with them in the months to come to ensure that we get this right. Although they now understand the problems and have introduced amendments in an effort to address them, they have yet to find the right solutions.

Michael Weir (Scottish National Party, Angus)

I have a strange feeling of déjà vu, in that this debate sounds very much like the one that took place in Committee on this very issue. As I recall, the exposition of the hon. Member for Yeovil (Mr. Laws) at one point touched on William of Orange and the Glorious Revolution, although that may have been part of some horrible nightmare.

George Osborne (Conservative, Tatton)

Does the hon. Gentleman agree that the big difference between today's debate and that in Committee is that the Government now agree with what the hon. Member for Yeovil (Mr. Laws) is saying? When we discussed this issue in Committee, the Financial Secretary did not agree.

Michael Weir (Scottish National Party, Angus)

That is a fair point; indeed, there has been considerable movement on the part of the Government.

Despite what I said about the similarity of the two debates, I do agree with many of the observations made by the hon. Member for Yeovil. I should point out that I have no experience whatever of the work of the Official Solicitor, but before being elected to this place I was a practising solicitor, so I have had some experience of the accountant of court in Scotland. I have grave reservations about whether the accountant of court will be able to deal with child trust funds in Scotland. In my experience, the accountant of court has an overseeing role rather than a proactive one, looking at estates that are being dealt with by curators and the like. Frankly, and at the risk of getting into trouble with the legal establishment in Scotland, dealing with the accountant of court was a somewhat bureaucratic experience.

We need to deal with child trust funds in an intrinsically different way. So far as children in care are concerned, for the most part, the sums involved will be relatively small. Regular payments might have been made in some cases, but my guess is that the majority of funds will consist of the basic trust fund. There could be quite a lot of relatively small funds and I question whether the accountant of court or the Official Solicitor—as I said, I do not know whether the Official Solicitor performs a similar function—would have the staff or expertise to deal with such matters proactively. In my experience, the accountant of court's organisation is very conservative. There is a danger that such trust funds will simply be left sitting and that no one will look at how individual funds are performing and whether they are in the best interests of the children in question.

I was intrigued to hear the Financial Secretary say that the Official Solicitor will react to the religious or ethical views of the child. How will that be done? Will the child phone the Official Solicitor and say, "I don't want the money in my trust fund put into arms companies, tobacco companies or companies that experiment on animals." I have no objection to people having ethical funds—many do, and rightly so—but this will create an entirely new problem with which the Official Solicitor must deal. Given the number of children who might be in care at a given time, I suspect that a considerable burden will be placed on the Official Solicitor, who will not have the resources to deal properly with the problem.

George Osborne (Conservative, Tatton)

The hon. Gentleman has hit on an excellent point, on which I did not touch. Does he agree that there is a question about whether the Official Solicitor is required to find out the child's religious and ethical concerns? Will he be required to write to the child or will the child have to find out the Official Solicitor's address and write to him?

Michael Weir (Scottish National Party, Angus)

That is an excellent point, because the situation has not been made clear. This issue needs to be addressed if such a requirement is to be part of the Official Solicitor's remit. Interestingly, a parent who is operating the account on the child's behalf might not necessarily have to take into account the child's religious or ethical views, which might differ from those of the parent. Such accounts would be intrinsically different.

There are various objections to the proposal and they have been noted. I have tried hard to think of an alternative, but I admit to failure. I cannot think of an easy solution, unless we are to set up a completely new department. The hon. Member for Yeovil suggested that the FSA and the Treasury provide advice, but there is an intrinsic problem with that idea. To a large extent, they are regulatory organisations, and if such organisations were to advise another part of government about investment opportunities for young citizens, that could lead to extreme difficulties and create a legal minefield. By comparison, the prospect of a child suing the Official Solicitor or accountant of court pales into insignificance.

I am not entirely clear about what will happen when a child is taken into care. If there is an order putting a child into care—I do not know what happens in England, but in Scotland the matter is dealt with through a children's panel or a court—will the child trust fund automatically be transferred to the Official Solicitor or accountant of court, or will a separate function be required for the transfer? Presumably, if the trust fund is already up and running when the child is taken into care, it is controlled at that point by a parent, or by someone with parental responsibility. I assume that that matter will be dealt with in the regulations, but I should be obliged if the Financial Secretary would address that point.

Ruth Kelly (Labour, Bolton West)

A lot of interest has been expressed in the role—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The Financial Secretary should say "With the leave of the House."

Ruth Kelly (Labour, Bolton West)

With the leave of the House, Mr. Deputy Speaker. I am very grateful for that advice. A lot of interest has been expressed in the role of the Official Solicitor, and I hope to be able to address some of the concerns raised by Opposition Members. The hon. Member for Tatton (Mr. Osborne) described the sales regime as the missing piece of the jigsaw. He is correct to say that that was initially expected in November, but the Financial Services Authority decided to do a second round of market testing to ensure that the sales regime was appropriate and adequate to sell stakeholder products across the full range—not just the child trust fund. It is important that that is done correctly and appropriately, and that those decisions are not rushed. We are in close contact with providers who either intend to or are thinking about entering the market for the CTF. Most providers say that they intend to offer child trust funds directly to people, so they would be unaffected by the precise nature of the sales regime on that account.

Turning to the role of the Official Solicitor, I would first like to point out that the number of children involved is not very great. It is certainly not the total number of children in care. I know that the hon. Member for Angus (Mr. Weir) is interested in the circumstances in which children have their trust fund managed by the Official Solicitor. I can tell him and other hon. Members in their places today that the Official Solicitor takes charge of an account where there is absolutely no one with parental responsibility for that child.

It applies where a child does not have face-to-face contact with their parents and when it is part of the care plan that the child will live permanently away from home. It applies where a child has had contact with their parents terminated, where a child's parents are mentally incapacitated, where a child's only parent is in prison for a significant period of time or where a child is looked after because they have been abandoned by both parents and there is no prospect of reunification with the parents for the foreseeable future. The vast majority of children in care will have someone with parental responsibility to manage their accounts.

David Laws (Liberal Democrat, Yeovil)

Has it been possible for the Financial Secretary to make any assessment of the number of cases in which the Official Solicitor would act in loco parentis?

Ruth Kelly (Labour, Bolton West)

It is extremely difficult to produce an accurate assessment of the numbers involved, but I think that we are talking of about 2,000 cases rather than the total number of children in care. The Official Solicitor is very clear about the appropriateness of undertaking this role. He already has responsibility for looking after the funds of children in different categories and the provisions fit neatly into that current role.

To answer some of the questions raised by the hon. Members for Yeovil (Mr. Laws) and for Tatton, the responsibilities of the Official Solicitor will include: monitoring the performance and suitability of the CTF account; moving the account to a different provider or a different type of account, if appropriate; keeping the child informed of any movements made; engaging with the child, as necessary; and relinquishing the management role either when someone appropriate with parental responsibility for the child becomes available or when the child reaches the age of 16. The hon. Member for Tatton asked about the position applicable to a child who may be mentally incapacitated at the age of 16, but I urge him to wait for the mental incapacity Bill—shortly to be debated in the House—which will answer his question.

David Laws (Liberal Democrat, Yeovil)

I must say that, the longer the Financial Secretary explains the job, the more difficult and undesirable it sounds. What guidance has she given to the Official Solicitor about how active he should be in managing these accounts in circumstances where markets are very volatile? Is it envisaged that the Official Solicitor is likely to be involved in managing these accounts, or would he or she do so only under crisis conditions?

Ruth Kelly (Labour, Bolton West)

I am afraid that I cannot answer the hon. Gentleman's question in full at this stage. We are currently involved in detailed negotiations with the Official Solicitor regarding the precise criteria that he will have to consider in monitoring the performance and deciding whether to switch providers for CTF accounts. I should point out that the Inland Revenue would open a child in care's account and at that point the Official Solicitor would take over the management of it. That is when the Official Solicitor would have to decide whether to continue with the existing provider or switch to a different one. As I am sure the hon. Gentleman would agree, monitoring the performance of the fund is a vital role.

Michael Weir (Scottish National Party, Angus)

The Financial Secretary has talked a great deal about the Official Solicitor, but can she tell us what discussions she has had with the accountant of court? Although that seems to be Scotland's nearest equivalent to the Official Solicitor, I know from experience that the accountant of court does not normally undertake this sort of work. Has the Financial Secretary discussed these issues with the accountant of court's department?

Ruth Kelly (Labour, Bolton West)

I can certainly assure the hon. Gentleman that we have had discussions on similar lines with the accountant of court in Scotland. Indeed, the Scottish Executive recommended the accountant of court as the office with the closest relationship to the Official Solicitor in England. However, those discussions are still ongoing. Given that the regulations are currently being drawn up, I can undertake that, when they are published shortly after the full recommendations are set out to the House—probably towards the end of this month or perhaps the beginning of June—I will provide a full commentary on the Official Solicitor's role in these matters. That will describe the circumstances under which the Official Solicitor would take advice and deal with the sort of concerns mentioned by the hon. Member for Yeovil.

I urge the House to support the amendment. It is important that looked-after children in care, where there is no one with parental responsibility, have an individual to take care of and manage their account and ensure that it is operated in the best interests of the individual child.

Lords amendment agreed to.

Lords amendment No. 2 agreed to.

Clause 4 — Inalienability

Ruth Kelly (Labour, Bolton West)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to consider Lords amendments Nos. 4 to 6 and Nos. 8 to 11.

Ruth Kelly (Labour, Bolton West)

These are purely technical and minor drafting amendments. Unless hon. Members want me to explain them further, I am happy just to present them and ask the House to agree to them.

Lords amendment agreed to.

Lords amendments Nos. 4 to 6 agreed to.

Clause 10 — Further Contributions by Inland Revenue

George Osborne (Conservative, Tatton)

I beg to move amendment (a) thereto.

Lords amendment No. 7 is rather curious and a little troubling. It gives the Government the power to make payments to children in custody. Those children would, as I understand it, otherwise be excluded because no one is in receipt of child benefit on their behalf.

The amendment is curious for two reasons. First, it amends clause 10, which deals with further payments rather than initial payments. As I understand it, in some rare cases, children of 14, 15 or 16 may have a child trust fund opened for them for the first time. Such children may be in custody and, under the current legislation, I am unsure whether they would receive an initial contribution or whether they could have a CTF. The Government may want to correct that omission later.

Secondly, the amendment is curious because, in all the consultation documents and in Committee debates, the Government said that they were planning to make further payments into CTF accounts only when the child reaches the age of seven.

Even in the Home Secretary's Britain there are not many newborn babies in custody. I do not imagine that there are any seven-year olds there either. On the face of it, therefore, the amendment is pointless, as it is about paying money to children aged seven who are in custody, even though there are no such children. However, I suppose that the Government want to have the option of making further payments to children aged over 12, which is when children can be in custody.

I hope that the Financial Secretary will say whether there are plans to make a further payment into CTFs at the age of 14 or 16. In the initial consultation document, it was envisaged that payments would be made at three different ages. I cannot remember whether those ages were five, 11 and 16 or five, 11 and 14, but the proposal was something along those lines. Perhaps the Government are reverting to their original plan. I suspect that all will depend on the electoral timetable prevailing at the time the children reach the relevant ages.

However, amendment (a) addresses a more serious point. The Home Secretary has stoked up an endless debate about whether more children should be in custody. Children who commit what most of us would regard as fairly serious crimes are not put in prison, but are given community service orders and so on. By definition, children who are in prison have committed very serious crimes, and the House needs to pause and consider whether it is really a good idea to give them an unconditional cash windfall at some future date. What sort of message will that send to such children about punishment and reward in our society, and about what society thinks of their behaviour?

I do not say that such children should be excluded totally from receiving payments. I also recognise that the Financial Secretary might contend that my amendment could lead to some rough justice. For example, a child who is not in prison on his or her 16th birthday might have been in prison for three years before that, whereas a child might happen to be in prison for three or four days just when his or her 16th birthday comes around. That child would therefore lose out. I agree that that would not be fair, and so amendment (a) is conditional in two respects.

First, the amendment would merely give the Government a conditional power to introduce regulations. That means that they could choose to take up the power, or not. Secondly, it simply suggests that, before money is paid to a child in custody, there needs to be a report from the person who is legally responsible for the child—the prison governor, or someone of that ilk—that attests to the child's good conduct over the previous year.

The amendment would mean that bad behaviour was not rewarded, and that the Government would not be sending out mixed messages. The prison authorities could use the provision as an incentive to encourage good conduct, and as a way of steering troubled children on to a more responsible path.

That seems a matter of common sense. The House should consider the alternative. A child who commits a crime that is serious enough to cause him or her to be sent to prison might be so poorly behaved in custody that the person legally responsible is unable to attest to his or her good conduct. That child might also have had various privileges withdrawn in custody, or been subject to disciplinary action. However, he or she will suddenly get a letter from the Inland Revenue saying, "Congratulations on reaching the age of 16, here's a cheque for £100."

That would undermine the work of the prison authorities, and make life much more difficult for them. In some ways, such a letter could cut across what they are trying to achieve, and I can imagine prison governors getting extremely frustrated. Just when a governor wants to insist on a certain form of behaviour from a child in custody, that would be undermined by the Inland Revenue unknowingly sending a cheque. The child would pick up the cheque, wave it in the governor's face and say, "I've just got a cheque for £100. Obviously, some people in the Government do not think that I am behaving badly."

Amendment (a) is a perfectly reasonable and conditional provision. It would give the Government the option to take regulatory powers, but would not insist on that. It merely says that children in custody should receive a Government handout from the taxpayer only if they behave well.

I think that that is a pretty new Labour idea. It fits in with what the Home Secretary is doing—with parenting orders, child curfews and so on—to encourage good behaviour in children. Moreover, I emphasise that the amendment refers to children who have ended up in custody.

I hope that the Financial Secretary will accept the amendment. If not, I shall press it to a Division.

David Laws (Liberal Democrat, Yeovil)

We support amendment No. 7, which deals with an anomaly in the original Bill, but we are not tempted by amendment (a), proposed by the hon. Member for Tatton (Mr. Osborne). He invited us to believe that it would unite new Labour and the Conservative party, and that is good enough reason for Liberal Democrat Members to be suspicious of it.

There are various practical problems with amendment (a). First, how likely is it that a young child who had committed enough crimes to be in prison would be deterred from similar behaviour by the fact that a payment would not be made to his or her CTF account—especially given that children cannot access those accounts until they are 18? I think that it is very unlikely that that would influence behaviour in any way.

Secondly, the amendment would be an enormously administratively complex and bureaucratic measure to enforce. For that reason, I am surprised that the Conservative party have proposed it. It could also create further anomalies between those young people who had committed crimes and been given custodial sentences, and those who had been given non-custodial sentences. Moreover, as Lord McIntosh explained in another place, it could create anomalies in respect of young people who had committed a crime but who were not in prison at the time of the reporting period, which is when the sanction proposed in the amendment would be implemented.

On top of that, the amendment could add a further penalty to the sentence being served by a young person. That does not seem sensible. Also, the Government's policy on CTF accounts is designed to give assets to children to help them, when they reach adulthood, to settle down, find employment and so on. To take that money away from children who—whether or not they have committed offences—are almost by definition the most vulnerable does not seem especially sensible.

For all those reasons, I am afraid that Liberal Democrat Members support the Government's position on this matter, and not the amendment tabled by the hon. Member for Tatton.

Ruth Kelly (Labour, Bolton West)

I am grateful to the hon. Member for Tatton (Mr. Osborne) for explaining the reasoning behind his amendment, and to the hon. Member for Yeovil (Mr. Laws) for answering his points so eloquently. He has almost saved me the need to respond to the amendment myself.

As originally drafted, the Bill would have prevented payments being made to the CTF accounts of children held in legal custody. Child benefit is not paid for those children and the award of child benefit is the key eligibility requirement for CTF payments. As the hon. Member for Tatton pointed out, we have left ourselves the flexibility to decide whether there should be age-related payments above the age of seven in future. Should a Government decide to make payments to children at any age over 12, those children who are held in custody on the relevant birthday would not receive the payments.

We amended the Bill in the Lords to treat children in custody as entitled to child benefit purely for the purposes of the child trust fund. The amendment supports the view that children in custody should not receive those payments unless a responsible person informs the Inland Revenue that the child has been well behaved for the year prior to the relevant birthday.

George Osborne (Conservative, Tatton)

Will the Minister deal with my point about the initial contribution to a child who opens a child trust fund when he or she is 14?

Ruth Kelly (Labour, Bolton West)

I do not envisage any circumstances in which that scenario will apply. Children who move to the United Kingdom after the age of 12 will either get child benefit if eligible, and therefore access to the child trust fund, or, if they go straight into custody, the child benefit will not be awarded and a child trust fund account will not be available to them until they have left custody. That is an extremely unusual case and I cannot envisage a situation in which we would want to open a child trust fund for the first time for a child who is in custody.

The hon. Member for Yeovil explained the practical, bureaucratic and administrative problems with the proposal. The argument touches on the principle of the matter. Only a small number of teenagers are held in custody—

It being one hour after the commencement of proceedings, Mr. Deputy Speaker put the Question, pursuant to Order [this day].