When the Child Trust Fund (CTF) was first introduced we weren’t particularly impressed. We couldn’t see why those who could afford to save for their children couldn’t just be left to do so (according to F&C, 70% of parents will continue to save for their under-eights even without the CTF to help them on their way).
And we felt that anyone who couldn’t come up with £250 to save for their children needed help in so many other ways that the CTF didn’t make much sense for them either. They have, as George Ladds of Fair Investment Company puts it, “bigger things to worry about” – paying today’s bills for example. If there was spare money knocking about in the coffers they could have done with getting it right away rather than having it put in a special account for their child to spend in Topshop when she hits 18 – note that there were never any plans to restrict what teenagers spent their mini-windfalls on when they got them.
But of course the real point is that there never was any spare money knocking about in any Treasury coffers. The money being handed over as CTFs was simply being added to our national debt – for those same children to deal with later via the tax system. As David Laws put it: “government payments into the scheme are essentially being funded by public borrowing… storing up debts which will have to be repaid by the same young people.” Not so much borrowing from Peter to pay Paul, but borrowing from Peter to pay Peter.
There has been much talk about how CTFs were not just about money but about education – they were, said one complainer, “a valuable educational tool for children who are learning about the importance of saving money.” That may be true (although I doubt it).
But should we really have to educate people about money by throwing it at them? Shouldn’t this be happening via the education system – which seems to absorb plenty of cash itself – anyway? We send our children to school in part to learn the tools they need to cope with life. So as long as they learn maths (and learn it properly), understand the concept of compounding, and are capable of running numbers well enough to know when they are being ripped off, they probably know all they need to know to get to grips with the financial industry.
That they don’t – and that, partly as a result, asset inequality in the UK is at extreme levels – is a major problem. But it isn’t one that was ever going to be solved by the Child Trust Fund.