Governments of every hue in the UK have failed miserably for decades to balance the short-term nature of politics with the need for long term planning. This is nowhere more true than in their attitudes to savings and investments.

It is an established economic pattern that those countries with higher levels of savings have higher long-term economic growth. People’s savings provide the cash for businesses to invest, increasing productivity. Successive regimes have tinkered round the edges with policies to increase savings through schemes like tax-free pension contributions and ISAs. But an increase in saving will naturally lead to a fall in consumer spending. Short-term growth will naturally suffer, making the Government of the day unpopular, and everybody knows that politics is a popularity competition.

This is particularly true in the current crisis: the coalition want banks to lend to encourage firms to invest, but not lend recklessly. They want consumers to spend the country out of recession but also to save. At the same time they are keeping interest rates historically low and encouraging inflation to reduce the deficit.

One of the previous government’s forays into incentivised saving was the Child Trust Fund (CTF). Under this scheme every new-born child got a free voucher worth £250 from the state to invest. Up to a further £1,000 a year could be invested by parents or grand parents into the child’s account. The child could then access the fund at 18 by which time, so the thinking went, they could use it to fund university or a new home.

Take up has been feeble. Only one in five CTFs have been added to. In the majority of cases, parents haven’t even made a decision where the money is to be invested, leaving funds languishing in default accounts. This made it easier for the new coalition government to scrap them.

Of course, this laid them open to the charge of ignoring the need to encourage saving as well as being unfair to children who hadn’t had the benefit of a CTF. So they came up with the Junior ISA.

This basically has all the tax benefits of a normal ISA – not capital gains income tax issues – but is set up on behalf of any under 18 who doesn’t have a CTF. The annual limit is £3,600 to be placed either in a savings or investment account or a combination of the two.

The Government benefits by looking like it is encouraging savings and they’re doing it cheaper than under the old CTF scheme.

Children could benefit from a pot worth over £105,000 at five per cent growth per annum, assuming the full annual allowance is used up to age 18.