Fund for poor children 'better spent on grants'

May 4, 2001

The government's proposal for a £500 Child Trust Fund to help children from poor families get a better start in life has been condemned by a Warwick University economist as "a waste of money".

The resources for the scheme would be better spent bringing back means-tested student maintenance grants, according to economics professor Ian Walker.

Professor Walker argues that the real value of the bond by the time it matures when the child reaches the age of 18 will be much less than it would if an equivalent amount were provided as a grant for 18-year-olds from low-income families.

This is partly because a bond that could be spent on anything might not be spent on higher education, which is one of the best investments for a young person and leads to significantly higher earnings in later life.

Professor Walker said the bond scheme was less effective than grants in helping people from poor backgrounds to better themselves because families that are poor when a baby is born may be significantly better off by the time the child is 18 years old.

"Means-tested support based on a family's income 18 years ago is an ineffective way of targeting resources. It is much better to means test for supporting an 18-year-old in education... (ie) to provide a means-tested grant."

Professor Walker said education maintenance allowances, which in effect pay children to stay on in post-school education and training, have shown that children from lower socioeconomic groups responded well to the offer of support for education.

But Professor Walker doubted that the government would be prepared to secure its proposal as a long-term commitment.

"People will have a hard time believing in it unless there is a physical fund set up since the government does not have a strong record on keeping to long-term commitments," he said.

• Vice-chancellors have welcomed the Child Trust Fund. "Any proposals that encourage young people who currently miss out on university to consider higher education as an option should be welcomed," said Universities UK chief executive Baroness Warwick.

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