Brown's child trust funds will favour poorer families

Gordon Brown will approve a scheme tomorrow under which the Government will contribute hundreds of pounds to a savings fund for eachbaby born in Britain.

In his Budget, the Chancellor will announce that the Government will top up the trust fund when the child reaches five, 11 and 16. When the child is 18, the "nest egg" could be withdrawn or rolled into another savings fund.

After a consultation exercise, Mr Brown said he had decided to make the scheme "progressive", with the Government giving more money to children from poor families.

Although Mr Brown's final decision will be announced tomorrow, the Treasury has drawn up plans for a "universal endowment" of £250 at birth – £500 for children from poor families. The cost has been estimated at £240m in the first year, rising to £350m annually when fully implemented. The move will be seen as an attempt to redistribute wealth and will be welcomed by Labour MPs, who have been alarmed by evidence of an "assets gap" between the rich and poor. Studies by the Institute for Public Policy Research think-tank (IPPR), which has championed the trust funds, have found that the gap is widening.

Between 1988 and 1999, the top 1 per cent of the population increased its share of personal wealth from 17 to 23 per cent. The richest 2.4 million households control wealth of about £1,300bn, while the combined wealth of the poorest 12 million households is about £150m.

The IPPR said yesterday: "Too often the financial buffer that middle-class families can offer their children allows them to protect their privileged position in society. Improving people's income alone will not lead the poor to have the opportunity to fulfil their full potential – to do this, the Government needs to build up their wealth."

The Chancellor will also give an upbeat progress report on another measure to spread wealth, the "savings gateway" scheme, under which the Government matches "pound for pound" the amount that people save. Pilot schemes among 1,500 people in five areas have attracted 500 "savers" who have put aside a total of £30,000, with a matching contribution from the Government. Mr Brown is expected to extend the scheme to the whole country after the trials end next year.

Yesterday, the Tories launched a pre-emptive strike on tomorrow's Budget by publishing a "charge sheet" saying Mr Brown was guilty of eight "crimes" – raising taxes; increasing council tax; higher borrowing; breaking the "50mph" limit by spending more than £50m per hour; attacking pensions and savings; hitting the performance of the stock market; imposing burdens on business; and getting his economic forecasts wrong.

David Willetts, the Tory spokesman on work and pensions, accused the Chancellor of turning Britain into a "nation of means-testing" through his complicated tax credit schemes. "Up to 25 million people could be living in households on means-tested benefits by the end of this financial year," he said. Mr Willetts said the new child tax credit, which took effect yesterday, would penalise couples in which both people worked if their joint income topped £50,000 a year. He claimed a married couple each earning £30,000 a year would be £529 a worse off than under the current system.

"This is a shameless breach of the principle of independent taxation. It is also a stealth tax on two-earner couples," Mr Willetts said.