Child Trust Funds

With tighter public spending expected from the Government this Autumn, the child trust fund could be one of the "less unattractive" options for cuts, says Institute of Fiscal Studies deputy director Carl Emmerson.

In an IFS observation last week Emmerson assessed the pros and cons of abolishing the initiative. He says the need in the medium-term to reduce public borrowing makes it natural to try to identify areas of public spending that could be cut with the least pain and that the CTF is a possible candidate.

CTFs were launched in 2005 but were backdated for children born on or after September 1, 2002, to help boost long-term savings for children. All children receive £250 at birth or £500 for those in lower-income families with a second payment from the Government of £250 made shortly after the child’s seventh birthday.

Emmerson says abolishing the CTF would make “a small but not insignificant contribution” to the £26bn spending cut estimated to be required by 2013-14 under the Government's spending plans.

He says: “When the time for tough choices about public spending arrives abolishing the child trust fund could be one of the less unattractive options.”

Child trust fund supporters argue the saving initiative complements existing spending on schools and cash transfers to families with children and that it could help improve their ‘life chances’ through a stronger saving culture. But Emmerson says though abolishing CTFs would make newborns worse off in 18 years time, spending cuts in other areas could be even more detrimental.

He says cuts to benefits or tax credits would reduce the disposable cash parents have to spend on their offspring during childhood and public services cuts could reduce the quality and quantity of the services on offer. He says: “Both could reduce the quality of life and the future life chances of children by more than the abolition of the child trust fund.”

Watch this space as more public spending cuts loom large……

Source: Moneymarketing

Banks receive 50 times more complaints than advisers

Banks are facing more than 50 times as many complaints as financial advisers, according to figures released for the first time by the Financial Services Authority (FSA).

The aggregate complaint figures show how many complaints regulated firms have received and how they have dealt with them.

In the second half of 2008, banks received 988.702 complaints, more than 53 times as many complaints received by advisers, which received a total of 18,633.

The figures show the extent of consumer dissatisfaction with bank advice and support figures released earlier this year showing advisers are the most trusted of the financial services profession.

The figures show an upward trend in bank complaints, which increased 8% between the first and second half of 2008 compared to adviser sector, where complaints fell 5%.

Advisers also trumped bankers in the percentage of complaints that they handled, closing 20% of complaints they received, compared to just 11% of the complaints banks received.

Dan Waters, director of retail policy and conduct risk at the FSA, said the publication of the figures for the first time would help consumers better inform themselves of how the industry operated.

‘This is stage one of our drive to say more about how the industry handles complaints and builds on our recent proposals, currently out for consultation, about the publication of firm-specific data,’ he said.

We expect firms to treat customers fairly by dealing with complaints promptly and efficiently. We are focusing even more attention, particularly through intensive supervision, on ensuring that firms are dealing with complaints properly.'