CHILD TRUST FUND
Abolished – anger on the left
The Coalition have agreed to the abolition of the Child Trust Fund. Introduced in 2002, the Child Trust Fund was the world’s first universal savings and asset accumulation policy for young people.
Every child is paid £250 at birth, and then again at age seven, into an account that is locked away until he or she turns 18. Children from low income homes get double payments, and additional sums are contributed to the accounts of children with disabilities.
Contributions from families of up to £1,200 a year can be made into the fund tax free. The idea behind it (and it draws from ideas outlined in the book The Nudge which suggests that choice engineers in the public sector can persuade citizens to make decisions that benefit them as individuals and society through interventions and incentives) was that it affirms that all citizens should be entitled to a minimum asset stake, and that social justice will be strengthened if each young person, and not just those from better off homes, has the ability to start out in life with some independent resources of their own. And it is important theoretically, say supporters because it places the equitable distribution of asset holding at the centre of social policy, rather than just income transfers, such as benefits and tax credits, vital as they are.
As such, supporters of the Child Trust Fund including Nick Pearce, who formerly headed the NO 10 policy unit, had the potential to foreshadow a wider transformation of the welfare state, in which the possession of wealth and assets would become an increasingly central tool of social justice strategies. That is indeed how many social policy theorists in the UK and elsewhere saw it. Certainly it was seen as a ‘progressive’ policy (code for left of centre) that should have been backed by the Lib Dems-but it wasn’t. Critics suggest that the sums involved are not sufficient to have much impact and that funds in any case could be much better targeted and have more impact elsewhere.
The Lib Dems have pledged for some years to abolish the Child Trust Fund, on various grounds . David Laws said most recently that endowing people with an asset is dishonest when public debt is so high, though the same argument could be applied , surely, to the higher rate tax reliefs for savings into pensions and ISAs . They have persuaded their coalition partners not just to restrict Child Trust Funds but to abolish them completely from 2011.
One senses that the left will use this as a stick with which to beat the Lib Dems into the future.