Dear Chief Secretary to the Treasury,
I'm afraid to tell you there's no money left.
Signed, Liam Byrne

(Outgoing Labour Chief Secretary to the Treasury. May 2010)

Wednesday, 26 May 2010

Children's money

The media tried hard to whip up a storm of indignation about the demise of "Child Trust Funds", former Home Secretary David Blunkett even said that scrapping the funds was 'an act of betrayal' - although he didn't say who was being betrayed.

The storm didn't really happen. Let's see why.

The payments started in 2002 and a nice website in nine languages made sure everybody knew their entitlement. All ...
Eligible children born on or after 6 April 2005 will receive their £250 voucher shortly after Child Benefit has been claimed and starts being paid.

As well as the Child Trust Fund (CTF) voucher, children in families with lower incomes will get an additional payment from the Government.
Those on lower incomes (and receiving benefits) were eligible for an additional £250.

Then, at age 7
Your child will get a £250 Age 7 payment. And if you were receiving the maximum amount of child tax credits, (or its equivalent, if you claimed Income Support or income-based Jobseeker's Allowance) when your child had their 7th birthday, your child will get an additional £250.
So, if the parents were receiving state benefits their child would get £500 at age 7, but those whose parents were paying income tax would only get £250 - seemed a bit unbalanced really.

The theory behind it was, of course, a noble one - give a child a nest egg and parents will be encouraged to add to it, but back in 2005 Barry Collins described opening an account with the voucher as a paperwork nightmare.

We Rigbys always thought it was a bit mean that babies were being given money for being born whilst at the same time older 'children' were being forced to pay whopping amounts of money to go to university and pensioners were having their pensions payments taxed.

So, they've gone. And good riddance? It would seem so, according to Tony Hazell
I never saw why I should effectively be asked to write a cheque for £250 to someone else's child.

On a professional level, CTFs are a jaw- dropping waste of public money, poorly targeted and not even popular among those they are aimed at.

How else can you explain that almost a quarter of people - 23 pc - couldn't be bothered to cash their voucher and had the money invested by the Government on their child's behalf?

Then there is the prospect of a generation of 18-year-olds being handed a cheque to do with as they will - a great deal for used car dealers and publicans, but a crying shame for the rest of us.

Sections of the investment industry were doing well out of them, charging 1.5 pc a year for basic tracker funds.

CTFs were saddling future generations with £320 million-ayear of debt - plus interest on the cost of borrowing the money.

In effect, Labour was handing out gifts of borrowed money to children then leaving them to foot the bill.
So, good riddance then, to another bad scheme.

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