Monday 22 February 2010

Child Trust Fund: are the Lib Dems embarassed?

Readers of Next Left will be familiar with my argument that the Liberal Democrats are wrong to want to abolish the Child Trust Fund.

But have the Lib Dems had second thoughts?

Back in 2005 the Lib Dem general election platform was summed up in a list of '10 reasons to vote Liberal Democrat'. One item on the list was their proposal to scrap the Child Trust Fund and use the resulting £1.5 billion to cut class sizes.

On a recent visit to the Lib Dem website - changed in colour tone from the traditional fiery orange to a greenish-blue - I find it is replete with the usual thoughtful policy documents. There are lots of one page summaries of party policy on education, the economy, families, etc, and a 21-page summary of party policy as a whole.

But where is the proposal to abolish the Child Trust Fund?

So far as I can see, none of the policy documents makes any mention of it.

Somewhat confused, I ring Lib Dem HQ. I speak to someone who tells me that all policy proposals are in the documents on the website. I point out that this policy isn't. They give me the number of someone who will know. They are out of the office. I leave a message. They haven't rung back.

So has the party dropped the proposal?

I don't think so. Nick Clegg mentioned it in his conference speech in 2009. And Vince Cable mentioned it in a speech to Demos in January of this year. A Lib Dem friend I contacted by email tells me that the policy must still hold because otherwise the party's fiscal arithmetic won't add up.

Clearly, however, the policy is no longer regarded as deserving quite the public airing it had in 2005.

Meanwhile, one more policy from the class of 2005 remains firmly in place - and far more in the public view than the proposal to scrap the CTF. This is the policy to scrap tuition fees.

The policy remains despite the efforts by Nick Clegg at the 2009 autmun conference to shift the party away from it. An excellent analysis by Julian Astle of the Lib Dem thinktank CentreForum makes two highly pertinent points: since participation in higher education is heavily skewed towards young people from higher socioeconomic groups, abolition of tuition fees will disproportionately benefit people from higher income groups - two thirds of the benefit will go to the richest 40%; and, second, there is no evidence that tuition fees have deterred young people from lower socioeconomic groups from going to university.

So the progressive case for abolition of tuition fees is non-existent.

But the party rebelled and a phased abolition of tuition fees remains central to the Lib Dem policy agenda.

Not that anyone has provided an answer to Astle's tightly argued critique of the party's policy. The sad fact is that many in the Liberal Democrats now treat the abolition of tuition fees in exactly the same way that some in Labour used to treat nationalization: as an article of faith, a totem of progressive intent that is beyond rational scrutiny.

Now the Lib Dems often justify their proposal to scrap the CTF by arguing that the resources could be used to fund something better. But since they are also proposing to lavish scarce public funds on an abolition of tuition fees, one is surely entitled to ask: Would it be fairer to keep the CTF rather than use scarce public funds to scrap tuition fees?

The CTF provides a small sum that goes to every child, providing the seed of a capital endowment for all young people at 18.

So the question is: Is it fairer to use scarce public funds to provide generous subsidies which will only be enjoyed by a minority of young people who come disproportionately from advantaged backgrounds, or to provide the seed of a capital endowment for every young person?

Is it fairer to use scarce public funds to provide a launch into adulthood for just some, relatively privileged young people, or for all?

I think the answer to the question is obvious.

No wonder the Lib Dems now seem reluctant to trumpet their policy of scrapping the Child Trust Fund.


_______ said...

The lib dems have formidable roots in republican style philosophy, so you would think the CTF is something that they would value highly. John Stuart mill the liberal advocated universal capital grants to citizens.

Stuart White said...

Immanuel: indeed, the CTF does fit with the Liberals' philosophy. Their opposition runs counter to their own historic and philosophical commitments. Maybe this is another reason why they are no longer putting much emphasis on the policy od scrapping the CTF.

Once again, Next Left is honoured to have your comments, Immanuel.

donpaskini said...

Hi Stuart,

Not convinced by the comparison between policies that you've made here.

By your logic about "scarce public funds", surely it would be fairer to give the Child Trust Fund only to poorer families, rather than as a capital endowment for all young people? Or to means test child benefit, rather than giving "generous subsidies" to well off families?

I think tuition fees are one of those stealth charges which most undermine support for universal public services. They burden young people and their parents with costs which disproportionately hit middle earners (the millionaire pays the same as a family earning £40,000).

Then we ask those people who have had to pay thousands in fees + taken out loans and run up other debts to pay the taxes to fund benefits and services which they tend not to use for the benefit of other people.

I'm completely with you on the CTF, but tuition fees are neo-liberal rubbish. Instead, how about giving everyone a tuition entitlement equivalent to the costs of three years post-18 education - some might use it when they have just left school, others might use it later in life. Progressive, universal, and might actually do something to help address the skills shortage that the UK suffers from.

Stuart White said...
This comment has been removed by the author.
donpaskini said...

With tuition fees, everyone whose parents are above a certain income threshold pays a flat rate fee. This is less progressive than charging people according to what they earn and own through the tax system.

I thought at present the CTF was weighted to give lower income families more money, rather than the same grant - do you think this should be changed?

I just think that post 18 education seems to be an area where you have abandoned your usually excellent analysis about why universal public services are in everyone's interests.

If you support the CTF for the reasons that you do, then I think you should oppose tuition fees. It is, after all, a rather strange process where everyone gets child trust funds and then most people on middle incomes use them to pay their tuition fees.

Stuart White said...

Don: I didn't make it clear enough in the post, but what I am really getting at is this: is it fairer to (a) provide every young person with a uniform capital grant, unrelated to parental income (because we don't want them dependent on parental goodwill as they start out in life), a grant they can use as they wish or (b) use the same funds specifically for education subsidies?

Your version of (b) is preferable to what we have now, but is still biased towards people who want to go into education or training.

If we did have (a), and the capital grant was at a high enough level, then I don't see why tuition fees would remotely be a problem. People who wanted to would have to pay for a higher education in just the same way they have to pay for equipment etc if they want to start a business - something else they could do with their capital grant. What's wrong with that?

In the end it comes down to a difference between a liberal perspective which wants to empower without being too judgmental about specific goods, and a more traditional social democratic approach which thinks in terms of access to specific 'merit goods'.

In this case, I think the latter is unduly paternalistic and discriminatory towards those who, quite reasonmably, want to do something other than get more education or training, e.g., start a business, move home, save for a deposit on a house etc. etc.

Stuart White said...

Ooops, sorry Don, I deleted the comment that your last comment responded to - I wasn't happy with it. The one above makes the point better, and hopefully answers your query above.

donpaskini said...

Hi Stuart,

Thanks as ever for the thoughtful and interesting comments.

I think your summary of the differences between the liberal and social democratic positions is a fair one, but I do think that post 18 education and training is a fine example of a "merit good", and that there is considerable benefit to both individuals and society from earmarking this funding for education and study.

Two other practical points:

1. The CTF doesn't cover even the cost of a term's worth of tuition fees at its current level.

2. You still have the problem that funding higher education through flat rate contributions rather than proportionately through the tax system undermines some of our wider goals around public support for universal provision of public services.

Alex C-D said...

Stuart - FYI, Clegg sounded pretty committed to scrapping the CTF in order to fund reduced class sizes when he was on BBC R4's "Woman's Hour" a week or two ago.

Stuart White said...

Thanks for the info, Alex. I wonder if Clegg volunteered the info about the CTF to 'Woman's Hour' without prompting or was pressed on the point. The latter would fit with my sense that the policy is still there but not one the Lib Dems really want to publicly air unless they have to....I should listen to the programme.