Illinois Asset Building Group - Building Financially Strong Families and Communities

On April 27, 2010 the New America Foundation hosted a policy seminar on the UK’s Child Trust Fund. The seminar was jointly organized by Dr. Reid Cramer and Dr. Rajiv Prabhakar (London School of Economics and The Open University) and was funded by the UK’s Economic and Social Research Council. Dr. Prabhakar gave an overview of recent developments on the Child Trust Fund and Professor Mark Drakeford (Cardiff University and formerly Head of Political Office for First Minister at the Welsh Assembly) highlighted the progress of asset-based welfare policy in Wales.

The event was held before the UK general election on May 6, 2010 and specific themes addressed in the seminar were:
 

• The likely consequences of the general election for the Child Trust Fund.
• How policy had developed further in the Welsh Assembly (one of the devolved administrations in the UK) than the rest of the UK. This was tied to the Welsh historical experience of greater emphasis on policies that promote equality.
• The policy challenges facing the Child Trust Fund, in particular the quarter of parents who did not open a Child Trust Fund account themselves and had a government allocated account opened for their children.
• The discussion noted that one way of building support for child development accounts in the US might be to tie this into wider reform of the benefit system.
• The debate noted that if child development accounts were introduced in the US then it would be unlikely to go down a UK route of not imposing any restrictions on how the asset is spent once it matured.   
• There was interest in the system of charges that UK financial providers imposed to supply Child Trust Funds.
• The discussion noted that immigration did not play a large role in the public discourse when the Child Trust Fund policy was first being developed (i.e. whether the children of recent immigrants would get a Child Trust Fund).

The UK general election led to a Conservative-Liberal Democrat coalition. One of the first acts of the new government as part of its efforts to reduce the UK budget deficit was to eliminate Child Trust Funds beginning in January 2011. As a postscript, the following points are relevant:

• The abolition of the Child Trust Fund is probably more due to political factors than policy failures. Although there were policy challenges facing the Child Trust Fund, it is debatable whether this policy can be judged to be failing. Furthermore, it was always open to policy-makers to introduce reforms (based on behavioural economics say) that might address these issues. What was probably more relevant is that the Child Trust Fund was seen as a totemic ‘new Labour’ policy and the new coalition government was unlikely to save such a policy.
• Notwithstanding, asset-based welfare might still be part of a new government’s emerging welfare agenda, particularly as it is reviewing the benefits system. Time will tell the level of commitment or opposition to asset-based welfare in the United Kingdom, and whether or how that experience will impact the United States.