Why not scrap the Child Trust Fund?

May 18, 2010

-Rachel Mason is public relations manager at Fair Investment. The opinions expressed are her own.-

The Child Trust Fund is set to become one of the victims of the new UK Conservative-Liberal Democrat coalition’s emergency budget.

The LibDems want to scrap it entirely; the Tories want to pull it from high earners. Currently, predictions are that there will be some sort of half way house, the official line being “the parties agree that reductions can be made to the Child Trust Fund and tax credits for higher earners.”

I have a one-year-old daughter who received her first Child Trust Fund payment a few weeks after she was born, which we then put into an account with the Children’s Mutual.

It was a nice gesture. Just like my health in pregnancy grant – 190 pounds to spend on fresh fruit and veg while pregnant. Again, a nice gesture. Unfortunately, it arrived in my account about two weeks before I gave birth and I had been living on nothing but pork pies and lard up until that point . . .

Seriously though, although I would never turn down free money, as a ‘middle earner’, I do find these benefits bizarre and slightly insulting. I’ll explain.

First, it would suit me much better to lose the benefits and be taxed 440 pounds less. All this taxing of people only to give it back under a different name is such a massive waste of time and money. And second, does the government really think I am incapable of eating properly or saving for my child’s future without their help?

I know there are some very poor families that may not have been saving for their child without the fund, but this surely is a wider problem that two vouchers from the government will not solve.

These people, many of whom may be in genuine poverty, could be helped much more effectively and at considerably less cost than the 350 million pounds a year the Child Trust Fund scheme costs in direct payments alone.

Launched in 2003, the fund aimed to give children born after September 2002 a good financial start in life by putting 250 pounds (500 pounds for lower income families) into a fund, topped up by a further 250 pounds (500 pounds for lower income families) when they reached the age of seven.

The idea being that with some money already in the account, the child’s family would also add to the pot and the end result would be a nice nest egg for the child when they turned 18.

Not only – as I mentioned earlier – does the scheme assume that most families would not be saving without being pushed into it by the government, but also, it has no real measurability. The first child ever to receive a voucher will turn 18 in 2020, and it is only then that we would be able to judge whether it has been a worthwhile exercise or not.

The LibDem proposal to scrap it would save 580 million pounds, the Tory plan, about 180 million pounds, and personally, I think it’s worth it, even if it does mean my daughter is 250 pounds worse off when she turns seven.

Yes, it will be annoying, but only because I had it in the first place. Had it never been launched, I wouldn’t be thinking – ‘hey, the government should be saving for my kid!’

But that’s the trouble with the last government; they were constantly launching benefit schemes for people who didn’t really need them, and this has made the task ahead of our new collation even more difficult.

Whatever they do to reduce government spending is going to seem like a cruel blow to someone.

When almost everyone receives benefits of some kind, almost everyone is a victim when they have to be taken away.

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