To bring together Tony Blair, Gordon Brown, David Blunkett and Alistair Darling to introduce a consultation document suggests you’ve got something big to say. This was the line-up at the launch of the child trust fund (or “baby bond”) prior to the 2001 general election. So what has happened to it?
The idea was that the state would pay a sum of money in to an account for all newborn babies. Children from low-income families would get extra. Parents could add to the account. The fund would accumulate to a significant sum by the child’s 18th birthday. The child could then decide how best to invest it for his or her future. Papers from the Sun to the Guardian supported the idea. There was interest and support, even admiration, from abroad.
The problem that the proposal tried to address was that assets are distributed far more unequally than income. 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 top 2.4 million households owned wealth to the tune of £1,300bn, while the bottom 12 million households owned £150m. Despite the vision of the “property-owning” or “share-owning democracy”, the number of people with no wealth – no assets to pass on to their children or to protect them during unemployment or old age – increased from 5 to 10 per cent (and from 10 to 20 per cent among those aged 20-34) between 1979 and 1996. Recent research carried out for the IPPR found that over half those aged between 16 and 24 – and 70 per cent of single parents – have no savings at all.
This inequality has tangible effects on people’s life chances. People with assets naturally feel more secure and more able to plan for the future; wealth helps people cope with the lumpy costs often associated with unexpected events in a changing world. The idea of the child trust fund was that people could use the money to pay for whatever might improve their life chances – a training course, say, or a car to get them to and from work.
Since the general election, we have had yet more research to show that social mobility is slowing, not increasing. John Ermisch of Essex University has shown that the wealthy are consolidating their hold over higher-paid and higher-status employment: they are more likely to marry each other and to follow in their parents’ footsteps. The child trust fund would extend to the children of lower- and middle-income families the opportunities that are taken for granted in wealthier households.
The policy ought to be popular with the electorate – like the Tories’ right-to-buy scheme for council houses, it offers ownership rather than state dependency, but offers it to a far wider circle of people, without the drawback of creating a further divide between haves and have-nots.
So why does the idea now look in danger of being shelved? Perhaps the most important reason is that it does not have legions of supporters who will make a noise if the government tries to drop it. Unlike the NHS and the education system, it does not have established producer and consumer lobbies which clearly understand that they will lose if the proposal is forgotten. The strength of the child trust fund – that it is a new approach to challenging unequal life chances – is also its very weakness. We need people to be more angry about the lack of social mobility in modern Britain and the shockingly unequal distribution of wealth.
A second weakness of the idea is that it lacks a single overriding objective. No one group has championed the policy. It does not fall squarely behind the agenda of any existing lobby or strand of thinking on the left. On the one hand, there are those (mainly in the Treasury) who believe that tackling poverty directly is the prime objective: they see an increase in income benefits as a higher priority. On the other, there are those (mainly around the Prime Minister) who believe that improving opportunities and increasing social mobility is the prime aim: they prefer investment in education. This confusion about the core aim of the child trust fund existed from the moment the policy was launched. Both camps support “baby bonds” but neither puts the idea at the top of its agenda. Yet the truth is that it would simultaneously alleviate poverty and improve life chances and that these two issues are intertwined.
Many in the government recognise this range of benefits. They need to be brave. The child trust fund is an innovative, internationally acclaimed policy, which will have a significant impact on the life chances of people in the UK. It is visionary, progressive and popular. Few policies can claim that much.
Yet it is not all down to the government. Individuals and organisations outside government must move “baby bonds” up their list of priorities. We often hear that Labour needs to be more radical. Here is a policy which is undeniably that, and yet the pressure to implement it is limited. If the child trust fund is shelved, the poor heirs of the Thatcher years – the generation of young adults with no wealth, struggling to achieve their full potential – will remain outside the winners’ circle. The left must grasp the ownership agenda and use it for progressive ends.
Matthew Taylor is director and Will Paxton a research fellow at the Institute for Public Policy Research (IPPR)