Brown's ailing child trust fund

By JASON BEATTIE
Updated: 07:28 EST, 1 August 2005

THE Government has launched a £2m advertising campaign to revive Gordon Brown's flagship child trust fund.

The Chancellor's policy has proved to be a flop with parents, according to Treasury figures. To encourage more families to take up the scheme, the campaign is to be launched in the press and on television, radio and the internet.

Every child born after 1 September 2002 is entitled to vouchers worth a minimum of £250. Parents can choose to invest the money in a stakeholder or non-stakeholder fund, which can be accessed by the child at age 18.

But HM Customs and Revenue has revealed that less than a third of eligible children have had trust funds opened on their behalf. Although 1.7m vouchers were sent out, only 499,000 have been cashed in.

The failure of the scheme is an embarrassment for Mr Brown, who had hoped the funds would encourage savings and prove popular in the run-up to the election.

Opposition MPs say the money would have been better spent on nursery education. The Liberal Democrats' work and pensions spokesman David Laws said: 'Gordon Brown's flagship policy has been a flop. So much so, that an expensive advertising campaign is necessary to try to increase the policy's credibility.

'Our fear is that many young people will choose to blow the proceeds of their fund at 18. All this money would have been better spent on early years education for children.'

The Treasury will automatically open a default account for a child if parents fail to invest their vouchers within a year. However, financial experts claim that millions will miss out on lucrative interest payments by failing to open an account immediately.

Family Investments, one of the biggest trust fund providers, estimates children could miss out on £640 by the age of 18 if their parents delay investing vouchers for a year.

Ivan Lewis, economic secretary to the Treasury, defended the low take-up. He said: 'We are really pleased with the number opened so far because it is in the interests of children that their parents open a child trust fund account with their voucher as soon as they feel ready.

'In order to get this message to everyone in society we continue to forge close links with public sector bodies and with the voluntary sector. This is in addition to the continuation of our successful national advertising campaign.'

• SPECIAL REPORT: Child trust funds