I came full circle about the child trust fund, swinging behind it as I realised its sheer impact, never mind elegance, a fortnight before they canned it. The CTF cost far less than tax breaks on pensions and Isas, and yet its takeup was far higher (40% of people have a pension scheme; 29% have an Isa; 75% of children have a CTF, half of those have people regularly topping it up).
The number of people saving monthly, long-term, for their children, went up threefold, and the amount they were saving went up by 60% since the trust fund’s introduction. It was, said David White, the CEO of the Children’s Mutual, “the most successful savings initiative there has ever been”.
On the level of social justice, its scrappage is dispiriting. Intuitively, I imagined that the people saving into the funds were in the higher income brackets, and the people failing to take up the accounts were poorer. In fact research by the Children’s Mutual shows this not to be the case (40% of those who don’t take up the fund are in affluent categories).
In low-income households there’s been a sea change – one-third of children whose parents have a combined income of £19,000 (this is substantially below the median) are having £19 put away for their futures each month. Children in that band would have no prospect of a lump sum at 18 without this fund. That would probably count them out of university, certainly if fees go up, as they are bound to.
For those who don’t go to university, and 57% of people don’t, a lump sum as modest as two grand could mean driving lessons, and a skill that catapults them into employability.
For middle-income families meanwhile, a well-managed fund, topped up to its limits, could yield £35,000. This is easily the difference between taking a degree and being discouraged by the size of a student loan.
The Child Poverty Action Group (CPAG), along with other similar organisations, wrote to the three main parties before the election, asking if they were prepared to sign up to a fairness impact study. This was to be a rigorously devised document against which new policies could be tested for their impact on inequality – of income, assets or access to services. Clegg said yes, Cameron and Brown gave positive but non-committal responses.
When the coalition was finalised, this request was made again: and while the CPAG waited for the response, this announcement came yesterday. What a disheartening statement of intent. In terms of changing behaviour – encouraging people to engage with financial products, to see themselves as savers, the success of the CTF was peerless.
So much of the conversation since the financial crash has been about the demise of personal saving, the ready acceptance of personal debt, and how important it is for the financial health of the nation that this is redressed. Now the one initiative that made a demonstrable, relatively inexpensive nudge in the right direction is to be axed. It is putatively in the name of responsible stewardship of the national debt. It is so incredibly short-sighted.