'CTF money better for paying debts'
Updated on 06 December 2008
Many families would have been better off paying off debts than investing in Child Trust Funds, Liberal Democrat Treasury spokesman Vince Cable has said.
After figures obtained by the BBC showed that a third of a billion pounds has been wiped off the value of the funds in the past year, he criticised the scheme, arguing it may have "pushed people in the wrong direction".
Since 2002, the Government has given parents £250 for every newborn, which they could then invest for their child's future.
But the new figures show that the value of the accounts has fallen by an average of 29% in the past year as the shares in which they were invested plummeted.
Cable suggested that the 75% of families who put their money into the accounts may have been better off using it for other purposes.
"One of my big concerns about this whole Child Trust Fund idea is that it was encouraging people to put whatever money they had into one particular kind of investment, and it was this long-term investment for your kids at 18, when actually for many families a better use of the money, if they had it, would have been to pay off their debts," he told BBC Radio 5 live.
"When you bring it down to the level of the individual family, to have a few hundred pounds coming in, it probably would make much more sense to pay off an overdraft carrying 20% or 30% interest than to put it into a long term account of this kind that we're now discovering can actually lose money."
The Government too could have made a better use of its money, he argued.
"There was a lot of Government money involved in it and Government money is scarce, or it should be, and probably could be better used on skills," he said.
"The people it was best designed to help - poorer people - a lot of them don't take up the scheme, they just leave the money in the bank."
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