By Lucy Phillips
29 April 2010
Experts have warned against Conservative and Liberal Democrat plans to cut Child Trust Funds.
In their attempts to slash public spending, the Tories have pledged to cut state contributions to the scheme, which costs £500m a year, for all but the poorest children and families with disabled children. The LibDems have said they will scrap the savings accounts for newborn babies altogether.
But Julian Le Grand, one of the fund’s principal architects, told Public Finance such policies were misconceived. He said the fund used only 0.6% of the education budget, and added: ‘It’s a tiny amount when compared with other areas of public spending. If you do feel the CTF has got to take its share of cuts, there are ways of doing it and preserving its essential character.’
He said annual costs could be brought down to £200m by cutting extra payments for seven year-olds and disabled children.
The scheme provides £250 for every child born in the UK. Labour, which introduced the fund in 2002, has promised to protect it ‘for the next generation’.
Le Grand, professor of social policy at the London School of Economics, said the scheme was ‘very popular among all social classes’ and had ‘significantly raised savings, especially for poor families’. He added: ‘You can’t sacrifice long-term investment on the grounds of short-term expediency.’
Kate Stanley, programme director at the Institute for Public Policy Research think-tank, echoed his concern. She said the funds were important in preventing ‘poor children becoming poor adults’.
She also welcomed the ‘savings culture’ they generated. ‘We are just coming out of the most serious financial crisis that many people have seen in their lifetime, and one of the reasons we got into that mess was because people were spending too much and saving too little,’ she said.
Stanley argued that it was important for the funds to remain a universal benefit because ‘it is administratively simple and you don’t miss anyone out’. She added that the funds were an ‘easy target’ for politicians because the benefits were not realised immediately and ‘it’s relatively new so not thoroughly embedded in our expectations’.
The Conservatives claim that the funds are failing to reach children who need them most, with uptake highest among wealthy families. The LibDems contend that the money would be better spent on children’s education later in life.
Other critics assert that there is nothing to stop teenagers spending the money on something frivolous when they turn 18.
The Institute for Fiscal Studies has said abolishing the scheme would make ‘a small but not insignificant contribution’ to plugging the public deficit and that spending cuts in other areas, such as pre-school education, might harm children more than stopping Child Trust Funds.
29 April 2010
Experts have warned against Conservative and Liberal Democrat plans to cut Child Trust Funds.
In their attempts to slash public spending, the Tories have pledged to cut state contributions to the scheme, which costs £500m a year, for all but the poorest children and families with disabled children. The LibDems have said they will scrap the savings accounts for newborn babies altogether.
But Julian Le Grand, one of the fund’s principal architects, told Public Finance such policies were misconceived. He said the fund used only 0.6% of the education budget, and added: ‘It’s a tiny amount when compared with other areas of public spending. If you do feel the CTF has got to take its share of cuts, there are ways of doing it and preserving its essential character.’
He said annual costs could be brought down to £200m by cutting extra payments for seven year-olds and disabled children.
The scheme provides £250 for every child born in the UK. Labour, which introduced the fund in 2002, has promised to protect it ‘for the next generation’.
Le Grand, professor of social policy at the London School of Economics, said the scheme was ‘very popular among all social classes’ and had ‘significantly raised savings, especially for poor families’. He added: ‘You can’t sacrifice long-term investment on the grounds of short-term expediency.’
Kate Stanley, programme director at the Institute for Public Policy Research think-tank, echoed his concern. She said the funds were important in preventing ‘poor children becoming poor adults’.
She also welcomed the ‘savings culture’ they generated. ‘We are just coming out of the most serious financial crisis that many people have seen in their lifetime, and one of the reasons we got into that mess was because people were spending too much and saving too little,’ she said.
Stanley argued that it was important for the funds to remain a universal benefit because ‘it is administratively simple and you don’t miss anyone out’. She added that the funds were an ‘easy target’ for politicians because the benefits were not realised immediately and ‘it’s relatively new so not thoroughly embedded in our expectations’.
The Conservatives claim that the funds are failing to reach children who need them most, with uptake highest among wealthy families. The LibDems contend that the money would be better spent on children’s education later in life.
Other critics assert that there is nothing to stop teenagers spending the money on something frivolous when they turn 18.
The Institute for Fiscal Studies has said abolishing the scheme would make ‘a small but not insignificant contribution’ to plugging the public deficit and that spending cuts in other areas, such as pre-school education, might harm children more than stopping Child Trust Funds.
