The Child Trust Fund, tax-incentivised universal children’s savings accounts launched in 2002, was arguably the most innovative social policy implemented under the post-1997 Labour governments. The objectives of the Child Trust Fund range widely across savings policy, financial engagement and asset-based welfare, and are not able for seeking to change the behaviour of both children and their parents. However, the Child Trust Fund today is at a crossroads: it is not achieving its aims as well as was hoped, and it is no longer affordable in its current state.
Administrative data that has emerged since its launch has revealed wide variations in savings rates for different children within the Child Trust Fund, and in active account openings by parents – a key objective of the policy. At the same time, the UK confronts an acute public spending squeeze starting this year to begin the long process of fiscal consolidation. This paper therefore outlines a package of reforms to boost the effectiveness of the Child Trust Fund while cutting the cost of the programme by over two-thirds, or £388m per year.