UK Government Decides To Scrap Child Trust Funds
As part of its plans for £6.2 billion of spending cuts, the Government has announced that payments into Child Trust Funds will be axed from the end of this year.
While most of the other savings announced by the Chancellor today, such as cutting back on major IT projects, slashing government spending on consultants and restricting the travel budget of the civil service, are fair enough – and can reasonably be presented as improving the efficiency of government – this decision stands out as a cut that will affect every child born in the UK after 2011.
The government wants to see families save more and borrow less, so why axe the one part of the welfare system that encourages them to build up a nest egg for their children? And why abolish this important step in ensuring all children get a fair start as they enter adult life?
David Laws, the new Chief Secretary to the Treasury, justified the move on the grounds that ‘government payments into the scheme are essentially being funded by public borrowing’, but this is, of course, nonsense.
Public spending in the UK is not hypothecated to particular taxes (or to borrowing).
It would make just as little sense to say that the police force was being abolished because it was funded by borrowing.
Child Trust Funds (CTFs) have been a great success since they were launched in 2002.
Three-quarters of children have CTFs opened for them by their parents (and, to ensure that no one misses out, the Government opens accounts for the reminder) and one quarter of accounts have received extra payments from family and friends.
This government wants to see households in the UK save more and borrow less, as part of the necessary rebalancing of the economy.
It is, therefore, odd that one of its first decisions is to abolish a programme that is specifically designed to encourage saving and that has been shown to do so.
No doubt every cut that the government announces this week and in the future will be greeted by squeal from some vested interest. But before we develop the stiffest of upper lips, could we just clarify some basic principles? The new coalition government has made great play of its commitment to fairness.
Indeed, in reference to the impending tide of cuts the Coalition agreement states: “Difficult decisions will have to be taken in the months and years ahead, but we will ensure that fairness is at the heart of those decisions so that all those most in need are protected.” Hasn’t this government failed its own fairness test already?
Lisa Harker, ippr’s Co-Director, said:
‘Scrapping the Child Trust Fund is a major backward step away from achieving greater equality in Britain. Campaigners have fought long and hard to establish the principle that the state should help families build up an asset to give all children a fair start as they enter their adult life. The spark provided by the Child Trust Fund has substantially increased parental saving since it was created in 2002 and meant children born since then will have a pot of money to help them get on in life when they reach 18. Now tomorrow’s generation are being asked to pay for the mistakes of today’s. We strongly urge the Government to reconsider this step for the sake of building a fairer Britain.’
Topics: 2010, borrowing, Britain, budget, Child Trust Fund, children, Civil Service, CTFs, David Laws, economic development, economic growth, Economy, Governance, government, Great Britain, health care, Health Care, moniter, monitor, news, payments, public services, savings, scrap, society, spending cuts, tax cuts, travel, U.K., UK, United Kingdom
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