Share the wealth

It’s time to talk assets

Labour suffers, and, more importantly, the public suffer, when its welfare policy in power lacks clear defining strategic goals. For the Labour party these should normally be: to narrow inequality, to eliminate poverty, and to provide both a safety net and a springboard. Indeed, these are the goals that should go beyond ‘welfare policy’ to infuse education, housing, taxation and all that the party in power does.

Too rarely has the party focused on making sure everybody owns an asset which can act as either safety net or springboard. This is all the more a shame today as the weight of insecurity sits more heavily than ever – insecurity of work, within communities, and across an unsettled international neighbourhood.

Labour began to pursue a more fully fledged asset-based welfare policy after the general election in 2001, parallelling its public service reforms, many of which similarly sought to extend opportunity to those failed by the existing system. The most well-known asset-based policy under Labour was the child trust fund. This put £250 in a bank account for every newborn child from September 2002, encouraged families to top the account up, and was pro-poor in assisting those on the lowest incomes, in care or with a disability more; families on lower incomes received up to £500. A second payment was made at age seven.

However, further plans by Labour to nurture a habit of saving were developed late and then cancelled by the incoming coalition, which also moved quickly to abolish child trust funds, with the Liberal Democrats in particular gunning for the programme. The coalition junior partners claimed that the money – about half a billion pounds – could be better spent on early years services. These services are indeed vital but, as one major review of the policy by IPPR noted, there is little point in boosting achievement if those benefitting from it are left without an asset once they enter adulthood: to go to university, to start a business – to do whatever else someone privileged with the freedom to choose might do.

Child trust funds were perhaps too slow-burn to really percolate through into the popular consciousness: even now it will still be another five and a half years before those first ‘baby bonds’ will be accessed by their beneficiaries. That other big asset transfer policy of modern times – the right to buy – was both instant in experience and visceral in its evocation of an Englishman’s home as his castle. But as a universal policy the child trust fund meant a direct transfer of assets weighted towards the least well-off, particularly to those would always otherwise be outcompeted and outbid by the children of families who own wealth already.

There are voices in Labour calling for a fresh look at this area. On these pages last year former Treasury minister Kitty Ussher called on the party to ‘dust off the asset-based welfare textbook’ to help ‘give people the tools to erect strong buffers in their own lives … regardless of their background.’ This is exactly what Labour should always be seeking to do, and all the more so in the age of insecurity. The recent Smith Institute pamphlet Wealth of Our Nation, which Ussher co-authored, restarted this debate. Meanwhile, the Labour-run London borough of Haringey now opens a credit union account containing £20 for each year seven pupil at its schools to encourage a habit of saving.

Barely a Labour party meeting goes by without a member lamenting that the United Kingdom has the sixth-largest economy in the world yet the wealth seems to filter through to far too few. Labour has focused on ‘predistribution’ – improving wages first – and appears to be looking to a combination of tax incentives, kitemarks and the bully pulpit it will enjoy once in power to encourage the living wage, if not to legislate for it. Such steps may free people to build up assets, but the party in government should also ensure good products are available which nurture the saving habit. All the while, a Conservative onslaught on inheritance tax is brewing. Labour can get ahead of this looming threat by making clear that, rather than simply oppose Tory plans, it stands for the spreading of assets to more people, precisely to help them erect those ‘strong buffers’ in their lives that others take for granted.

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Adam Harrison is deputy editor of Progress

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Photo: Merthyr Tydfil Borough Credit Union

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