To ask the Secretary of State for Justice what assessment he has made of the effect on clients of the reduction in the special interest rate paid by the Court Funds Office.

As part of the administration of funds in court the Lord Chancellor regularly reviews the interest rates paid on client accounts. In reviewing and setting the rate paid, the Lord Chancellor takes into account a number of factors including the amount of interest received on funds against the amount of interest paid to clients, the changing level and mix of funds held by CFO and administration costs.

Income generated on the client funds is influenced by the Bank of England rate. In light of recent movements in the Bank of England rate it has been necessary to reduce the level of interest paid on the special and basic accounts. Interest rates were reduced on 1 February from 6 per cent. to 3 per cent. on the special account and from 4 per cent. to 2 per cent. on the basic account. It has become necessary to reduce CFO's rates further and from 1 June the special account rate will be 1.5 per cent. and the basic account 1 per cent.

There are currently around 119,000 deposits in the special account: 101,000 held on behalf of young people with damages awards and 18,000 belonging to Court of Protection clients. The financial impact of the recent reduction in the special account rate on children and Court of Protection clients varies, as the latter tend to hold larger sums of money in the special account.

CFO rates compare favourably to most rates offered on instant-access accounts by banks and building societies. For example, for a deposit of £25,000 placed in a bank or building society savings account, the average rate of interest offered by some 464 different types of account is 0.71 per cent. gross AER (information taken from the FSA's comparative tables (www.fsa.gov.uk/tables) as at 17 April 2009 Financial Services Authority.)

It is important to stress that the purpose of the CFO and its special account is not to compensate or make financial provision for a client's situation—that is the role of the court or the welfare system as appropriate. The role of the special account is to provide a safe place for client's funds and to provide a reasonable rate of return. All special account clients continue to benefit from safeguards offered by this account.

The majority of deputies representing Court of Protection clients should have the ability to withdraw funds from the CFO and place them elsewhere if they believe this is in the best interests of the person they represent. Litigation friends representing children have the ability to apply to court for permission to remove funds.

The Lord Chancellor will be keeping the rates under review and should he consider it appropriate, further changes to the special account rate may be necessary in light of the recent and future Bank of England rate changes.

The CFO will continue to monitor the impact this has on clients.