15-12-03

Child Trust Funds must not become expensive gimmick – Barrett

John Barrett, Scottish Liberal Democrat MP for Edinburgh West, today warned the Government against allowing the new child trust funds (or baby bonds) to become an expensive gimmick.

Speaking ahead of the first debate on the legislation to introduce child trust funds in the House of Commons today, Mr Barrett said that evidence suggested the initiative would do little to help low income families and do nothing to tackle child poverty.

Under the scheme, the Government will put £250 into a trust fund for every child born after September 2002, with an extra £250 for those children born into low-income families.  Family and friends can supplement the fund that by up to £1,200 a year tax-free.  Children will only be able to take money out of their funds after their 18th birthday with no restrictions on what the money can be spent on.

In a statement, John Barrett, said:

"These new trust funds are going to cost the Government over £235 million a year.  In the current economic climate, we have to make sure such a commitment will achieve its desired purpose.

"Unfortunately, the indications are that those parents on low incomes can barely get by as it is and will not be able to supplement the funds of their children.  Evidence given to the Treasury Select Committee showed that a child from a low-income family, with a £500 contribution from the Government, would only end up with £900 when they reach 18.  On the other hand, better off families, who supplement their child's trust fund by the full amount, will end up with £34,000 at the end, tax-free.  The Government runs the risk of letting child trust funds become nothing more than a tax break for the rich.

"The fact is that families and children will have no access to this money until the child reaches 18 years old.  It will do nothing to end the child poverty which the Government has promised to tackle.  Even after the child reaches 18, the money in the fund will probably have to be spent on university tuition fees or repaying student loans if the Government gets its way.

"The Government would have been better putting this money into early years education, the very best investment that can be made in a child's life.  In my own constituency, Kirkliston Primary School would have gained between £20,000 and £30,000 every year alone, if the money for child trust funds was spent on primary education.  Just think what Kirkliston Primary and other primary schools across Edinburgh could do with that kind of money."

ENDS