Child Trust Fund will only be available to poor

October 8, 2009 by Baby Chums
Filed under: News

Child trust fund seeding payments of £250 which are paid to every newborn child in the UK will be axed by the Conservatives if they come to power, excepting, “poor” families.

Under the proposed change, 450,000 families a year will no longer qualify for the Child Trust Fund.

Conservative Shadow Chancellor George Osborne said the Child Trust Fund, instigated by The Labour Party would be scrapped for all but breadline families.

Tax credits paid to households with a joint income of more than £50,000 a year would also be axed. This is expected to effect one million families.

Conservatives dismissed rumours they would means-test child benefit and said this would remain as a payment. Free TV licenses and winter fuel payments for pensioners will remain.

Mr Osborne said the cuts were being made as part of the wider drive to rein in public spending and reduce the budget deficit. But he said there was also a need to ‘take a realistic look at the benefits the rest of society receives’.

Under the Conservative Party the scheme would only be open to disabled children and those from the poorest third of homes in a move forecast to save £300million a year. Existing funds will not be affected.

Kate Stanley, of the Institute for Public Policy Research, criticised the move. She said: “I am pleased to hear the Conservatives are not going to get rid of them altogether because they are one of the few tools we have to encourage saving and ensure everyone has an asset and a stake in society.

‘But we have always felt it should be a universal scheme.

If you start means testing you introduce a new layer of administration and paperwork. You also have to bear in mind that while your parents may be well off when you are born they may not be by the time you reach 18.”

Mr Osborne also announced plans to cut tax credit payments to middle class families, saving £400million a year.

Under Labour’s child tax credit system, families earning less than £50,000 qualify for the full ‘family element’ of the benefit, worth £545 a year. The benefit is paid out on a reduced basis to families earning up to £58,000.

Under Conservative Party plans the benefit will continue to be paid in full to families on less than £40,000. Families on more than £50,000 will receive nothing.

Parents can pay in up to £1,200 a year tax-free. Almost 30 per cent of new parents do not bother to open an account for their children.