Celebrating the Child Trust Fund

October 2, 2009 by
Filed under: Public policy 

Maybe I wasn’t listening – and, hey, given the quality of most of the speeches I’m not apologising – but among the achievements being lauded at Labour Party Conference I didn’t hear much mention of the Child Trust Fund. The CTF gives all new-borns a savings account with a small nest egg, which is bigger and topped up for the least well-off. The lack of celebration is a pity for several reasons:

• It is a genuinely innovative policy and one that has impressed many progressives in other parts of the world

• Unlike so many other social policies it is inherently long term (and therefore likely to be more realistic in its aims), seeking over a generation to make a profound difference to lower income attitudes to saving

• It does seem to be working (see below)

• It is good mixture of ideas associated with the left of centre (redistribution, role of the state in increasing life chances) and the right (importance of saving, foundations for thrift and responsibility).

• It may be vulnerable after the election given that the LibDems oppose it and the Conservatives are looking for cuts, cuts and more cuts.

• I was involved in making it happen (as I implied yesterday, I increasingly find myself raking through the ashes of my past to find a scorched cardboard buttress temporarily to prop up my collapsing self esteem).

I am grateful to David White from The Children’s Mutual for this list of CTF successes:

• All children born since September 2002 will have a much needed financial head start at age 18

• More than 4.5 million children already have open, active accounts, approx. 70,000 are opened each month

• An estimated 11m adults are involved and research confirms the popularity with them of the CTF

• Savings rates have trebled, 2 million parents are saving for their children each month

• Monthly amounts being saved for children up from £15 to £24, a 60% increase

• Families from all walks of life are embracing the CTF by engaging and saving, including low income families, 30% of whom add monthly to their child’s CTF

• More than £2bn invested in children’s futures

• CTF has acted as a catalyst for new financial education initiatives in schools

• 97% of the CTF Government investment goes to families with household income below £50,000

• More than 100 British companies are involved in supporting parents by giving access to CTF’s

If we stick with the CTF, we will create an expectation in every family that saving is part of preparing children for adulthood and we will provide every young adult with a nest egg which will not only encourage them to save more but could provide the spring board for opportunities they would not otherwise have had. Like the Open University or the Channel Tunnel, we should see the CTF not as something for one party to be proud of, but for us all to celebrate.

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13 Comments on Celebrating the Child Trust Fund

  1. Best of the web 02/10/09 | www.the-vibe.co.uk on Fri, 2nd Oct 2009 2:05 pm

    2. [...] Celebrating the Child Trust Fund Among the achievements being lauded at Labour Party Conference I didn?t hear much mention of the Child Trust Fund. The CTF gives all new-borns a savings account with a small nest egg, which is bigger and topped up for the least well-off. The lack of celebration is a pity for several reasons: http://www.matthewtaylorsblog.com/public-policy/celebrating-the-child-trust-fund/ [...]

  2. Will Sheward on Fri, 2nd Oct 2009 2:15 pm

    3. “…the Conservatives and looking for cuts, cuts and more cuts..”

    Given that your blog appears to now be one of the RSA’s most important news stories (judging from the website homepage – the only permanent one), do you think you might at least try to pretend that your current role isn’t just a continuation of your previous role in New Labour?

    I’m sitting in the Library at the moment, for the first time in quite a while, utterly dismayed at how the RSA has distanced itself from commerce and manufacturing in favour of becoming a slight left of centre social campaigning organisation and reading your blog posts really isn’t improving my mood.

  3. Chris Cook on Fri, 2nd Oct 2009 4:15 pm

    4. Matthew

    As a former director of an energy exchange, I think I know a bit about finance and so on, and I think that this fund – while Labour may rightly be proud of it – is in fact an opportunity wasted.

    Instead of putting the funds on deposit in a building society or even gambling it in the stock market, there is an opportunity for them to be invested locally in the very schools which these kids are going to be attending.

    Using the new UK Limited Liability Partnership (LLP) as a framework there is no reason why Trust Fund investment should not be made in (index-linked) income bearing Units (a bit like units in a Unit Trust, but using partnershipprinciples, rather than trust or company law) on the one hand, while the school is financed affordably (the absence of debt cuts the cost dramatically) on the other.

    The outcome is a new form of local “Municipal Equity” in fact, not through the conventional Limited Liability Company – which is what makes the private sector “private” – but a simple but radical and complementary new option.

  4. School Pool « Nordic Enterprise Trust on Sun, 4th Oct 2009 9:36 am

    5. [...] Trust Funds All good clean fun. But then the next day I read a post by Matthew Taylor on his Director’s blog at the Royal Society of Arts site in which he [...]

  5. Sue Boyle on Mon, 5th Oct 2009 11:42 am

    6. There are many paradox’s here Matthew. The ‘parents’ or generation you claim to be saving more due to this scheme are in fact the debt generation in other areas of life. Credit cards, loans, overpriced mortgages have left the banks with so much ‘debt’ business it was too much for them.

    Secondly, we should believe the banks and economists will be long term guardians of savings for our children, yet we coudn’t trust them with our pensions (apart from their own of course). How many more bail-outs before my child’s savings can be claimed?

    Finally I remember a parable referring to talons or something like that. Storing them in the ground hoping I can find some future use for them. I am not religious but I remember it was the investment that bore fruit not the saving.

    I’d rather see attention on the obscene divisions of wealth and power so my children can enter a more evolved world, not save in hope that they can survive what lies ahead with a total amount that wouldn’t dent a current bankers monthly bonus or wine bill for the year (and also assuming the banks prove the best custodians if they even exist in the same form in 20 years).

    Appears like chatter and meaningless stats.

  6. matthewtaylor on Mon, 5th Oct 2009 3:58 pm

    7. Fair enough Will. Of course Labour is committed to cuts, cuts, cuts too. But as Labour almost certainly isn’t going to be the next Government it isn’t so relevant to the future of the CTF. As for the rest. Last week we published a major report on investment and pensions (which gots lots of coverage on the money pages) and this week our new chair is doing the AGM key note on the importance of invention and entrepreneurship. We have had most of the shadow cabinet speak here in the last 18 months and one of them writes in the latest journal. George Osborne has twice quoted me positively in recent speeches and articles. We are also trying to develop a new project on ‘olderpreneurs’. So don’t get too depressed.

  7. matthewtaylor on Mon, 5th Oct 2009 3:59 pm

    8. Thanks Chris have you tried out this idea on Government? What response did you get?

  8. matthewtaylor on Mon, 5th Oct 2009 4:02 pm

    9. Thanks Sue. This is a bigger debate. Let me just make one observation. There is powerful research evidence that suggests that having even modest savings makes a big impact on people’s sense of self esteem and personal autonomy. isn’t this too the evidence from things like the Grameen bank. However small the sums, poor people feel empowered by being trusted to save

  9. Chris Cook on Mon, 5th Oct 2009 6:10 pm

    10. Hi Matthew

    I emailed you from my hotmail account. Hopefully it got past your spam filter…..

    Chris

  10. DT on Mon, 5th Oct 2009 6:22 pm

    11. Thanks Chris have you tried out this idea on Government? What response did you get?

  11. Sue Boyle on Mon, 5th Oct 2009 9:03 pm

    12. I’m sure poorer people having the means to save some money would in fact help them feel slightyly less poor, excluded and hopeless. However, the self esteem issue is another confusing paradox.

    Surely this policy isn’t about raising self esteem? It should have practical value.

    If, however, it is about self esteem there is an assumption that raising self esteem through financial ownership is a good thing and needed research! I would say the core of the problem is those people who need millions, if not billions, saved in various bank accounts to help their self esteem. A significant number of bankers included. Their need and acquisition of ‘self esteem’ through financial hording is neither impressive nor successful at a social, enivronmental and economic level. Should we seek to replicate at a small insignificant level? Self esteem can be very dangerous when mixed with materialistic egos.

    I would argue that ‘poor’ people would have better self esteem if they felt part of society or community that was fair. They would have better self esteem if they were empowered through financial means to make changes or finances were invested in their education, opportunities and most importantly if they had hope that they could become part of a fairer world.

    I still believe the crux of the matter isn’t a token gesture bank account but efforts to reddress the balance of wealth and power. That is the gift the older generation could offer the young. Ever wonder why they don’t vote, escape through drugs and take little interest in social development?

  12. Chris Cook on Tue, 6th Oct 2009 8:44 am

    13. DT

    The problem is getting to the decision makers.

    There is a protective layer of special advisers and civil servants. The former tend not to be interested in anything that does not originate from their favourite think tanks and/or corporate lobbyists, while the latter do not do “radical” or even “new” unless their feet are held to the fire.

    School funding is just one application of a generic new set of asset classes.

    See

    http://www.policyinnovations.org/ideas/innovations/data/000085

    This went down well re housing

    http://www.slideshare.net/ChrisJCook/equity-shares-a-solution-to-the-credit-crash-presentation

  13. Liz on Wed, 7th Oct 2009 12:07 pm

    14. I was recently part of a focus group on child trust funds for one of the major providers, which seemed aimed at finding out what would motivate people to top up their savings to CTF. The overwhelming attitude of most of the ordinary parents there was that they were not that comfortable with the idea of their children accessing large sums of money at 18 to do with what they wished – you may have your own opinion on this but that was the main response. Also, many people pointed out that they were trying to save or manage as a family or household and not necessarily just for named individuals, I think this is a really important point – if you have an extra £10 or £20 a month, is it better to invest it in pensions to save the financial or care burden on children when we are all older? It seems that the government, while admirable in its intention, is deciding on behalf of families and children how and what they should save which doesn’t really leave much room for the development of independent family financial choices.

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