Junior ISA's are reverse Robin Hoods

girl holds teddy bearJunior ISAs are being trumpeted ahead of their November launch, but they are a tax break for the wealthy who would have saved anyway and will be of no help to most children.

At least a third of families cannot afford to save. And the Institute of Fiscal Studies says the government's cuts will make that worse. Junior ISAs are reverse Robin Hoods, taking money from the poor and giving it to the rich.
Research to promote Junior ISAs by the Association of Investment Companies revealed that more than half (55%) of parents say they are not likely to take out a Junior ISA. Of these, 61% say they do not have the money. That's a third of all parents asked.

That's hardly surprising. The latest Office of National Statistics figures show just how many kids are in poverty.

Measure of poverty

In the official jargon: "In 2009/10, 20% of children (2.6 million) were in households in the UK with incomes below 60% of contemporary median net disposable household income Before Housing Costs (BHC), and 29% (3.8 million) After Housing Costs (AHC)."

To you and me that last figure means listing the amount of money every family in the UK had to spend after taking into account their rent or mortgage and essential bills in order and taking the figure smack in the middle. That is the median. Then taking 60% of that as the poverty figure. A staggering 3.8 million children live in families like that.

The government figures show that 16% of working-age adults (5.7 million) were in households in the UK with incomes below 60 per cent of contemporary median net disposable household income Before Housing Costs (BHC), and 22% (7.9 million) After Housing Costs (AHC).

Recession worse than before

The economics think thank the IFS said this month that the current recession was worse than previous recessions and it was taking longer to recover. The IFS also said it had had hit families hardest.

"Household spending fell by almost 5% in real terms between the first quarter of 2008 and the second quarter of 2009. This compares with falls of just 3% during the recessions of the early 1980s and early 1990s; Even by the first quarter of 2011 spending was still 4.4% below its peak. By this stage of previous cycles spending had already returned to its pre- recession peak," it said.

"On the official forecasts made alongside the March Budget we won't reach pre-recession levels of household spending until the first quarter of 2013. Though now widely seen as optimistic, even these forecasts imply almost twice as long a period of expenditure below pre-recession levels as occurred in previous recessions."

The IFS pointed out that, alarmingly, families were having to cut back on food, not just luxuries. That is bad news for most families and terrible news for kids. Not that you notice from the guff being put out by those trying to sell Junior ISAs.

Baby boom?

Product seller Family Investments carried out its own research and found similar numbers of parents not interested in Junior ISAs (75%). Rather sickly, it put it as: "New-borns could miss out on £165m in the first year of Junior ISA," as if somehow the money was there to save but was being wasted.

The Child Poverty Action Group has a different view. A spokesman said: "It is no surprise that a third of parents say that they do not have enough money to put into junior ISAs when almost a third of children in the UK are living below the poverty line. We have exceptionally high levels of child poverty compared to most other wealthy European nations.

"It's great that some kids will have money put aside for them, but if the government is really serious about social mobility they need to wake up to the tremendous inequality that will develop under this scheme."
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