Give £10,000 to every 18 year old

How bold is a Labour government prepared to be in its second term? A modest glimpse of the possibilities has emerged in the past week, with reports that Gordon Brown and David Blunkett have discussed giving every young person up to £10,000 (the spin machine quickly had this reduced to £7,500) on his or her 18th birthday. "What?" an apoplectic Andrew Neil asked the New Statesman editor on Radio 5 Live. "Even Prince William?" Well, actually, the taxpayer will be giving the prince something like £10,000 next year, when he will start a university course costing roughly that amount. In that sense, about one-third of 18 year olds, mostly from affluent homes, already receive a sizeable gift from the state. What about the other two-thirds, who include nearly all those from very poor homes?

If they truly want social cohesion, if they wish to lay any claims whatever to meritocracy, western societies must concern themselves with capital inequality as well as income inequality. It is well established, both in Britain and America, that since the 1970s, the gap between rich and poor has become a chasm. One recent US report showed that the average top executive now earns 419 times as much as the average factory worker, against just 42 times as much in 1980. No number of stealthy taxes or credits for working families can make more than a marginal, and probably temporary, difference. This is because, as Robert Reich, the former US secretary for labour, put it in an NS article in June, "capital assets are now where the action is". The rising value of houses, shares and pension funds have made millions of middle-class families asset-rich to an extent that would have amazed previous generations. In the absence of adequate wealth or inheritance taxes (or of a stock market crash), their offspring, in Professor Reich's words, "will inherit the largest intergenerational windfall in the history of modern civilisation". In addition to what sociologists call their "cultural capital" (education, high-level skills, good social contacts), these young people can look forward to real capital. And since it is a law of capital that to them that have shall be given, we can expect permanently rising inequalities, regardless of what any government tries to do by way of income transfer.

Against that background, gifts of £7,500, £10,000 or even £50,000 (proposed by two Yale law professors, and quoted approvingly by Professor Reich) begin to look quite modest. Suppose that, from 2018, we were to charge all students the full costs of their courses. Suppose that, for every child born in the 21st century, the government opened a "millennium account" into which it paid £250 annually, which, after 18 years, with compound interest, would grow to around £10,000. Suppose that this fund could then be used for various stated purposes: to help pay for an educational course (not necessarily a degree), to start a business, to put down a deposit on a house or flat or any combination of these and other things. The recipients would be at liberty to leave all or some of the money in the account, accruing interest, for use at some later date. The choice would be theirs. No doubt some money would leak into cocaine-snorting orgies or wild weeks in Ibiza, but so what? All money, public or private, is sometimes used for improper purposes.

Equally the government might introduce means-testing, require families to match state payments with their own money, withdraw funds from antisocial teenagers and indulge in all manner of Singapore-style authoritarianism. But again, all state handouts carry these dangers. A wise government - and what should characterise the centre left is that it still believes in the possibility of such a thing - will prefer simplicity and a large degree of liberality.

People would not then start life on an equal footing; far from it. But at least they would start with equal handouts from the state, which is not now the case. And the scheme fits with what we understand of new Labour or Third Way philosophy in almost every respect. It is undeniably redistributive, but in a way that encourages self-help rather than the dependency created by regular income handouts. (If it reduced the numbers who spent a lifetime on social security, it might eventually save public money.) It allows choice and, to use Anthony Giddens' favourite word, "reflexivity". It proclaims simultaneously the value of social inclusion and the value of money-making enterprise. And it implicitly proposes an historic bargain between the centre left and the affluent classes: we'll get out of your way, and let you make as much money as you like, on condition you give up some of it to allow others a chance.

This article first appeared in the 13 September 1999 issue of the New Statesman, Kids just say no to party politics