Projects backed by the fund were braced for 20m of cuts in 2004-05 (YPN, 4-10 February, p4) but after a review the department has dropped the plan.
A spokeswoman said the cuts were averted by using "new resources" from elsewhere. As a result, the Children's Fund budget for the next financial year will meet the 160m figure originally promised.
The DfES is also setting up a contingency fund, expected to be worth more than 20m.
NCH interim director Maurice Rumbold said: "We remain concerned about the funding situation for 2005-06."
The U-turn follows an admission to Parliament by young people's minister Margaret Hodge that mistakes were made with the fund.
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