An electioneering child trust funds scheme is to be announced by Tony Blair today.

The key addition to Labour's second term election manifesto will see all newborn babies receiving a lump sum between £300 and £500.

The money, to be held in a building society trust fund, will be added to on the child's fifth, eleventh and sixteenth birthdays with amounts of between £50 and £100. The fund is expected to total between £5000 and £7000 by the time it is released on the child's eighteenth birthday. Parents will also be able to contribute to the fund, which will be tax-free.

The scheme is expected to remove one million children from poverty by 2004 but has raised questions of how and on what the money can be spent, with a consultation over the details of the scheme beginning today.

Also included in the plans, the results of research by the Treasury, DfEE and influential centre-left think tank the IPPR, is a "savings gateway", allowing adults on low incomes to have their savings matched by the government up to a sum of £1800. The scheme is expected to cost £1 billion.