Tuesday 1 June 2010

Danny Alexander on the Child Trust Fund

Last week, as we reported here at Next Left, David Laws and George Osborne scrapped the Child Trust Fund (CTF). In very sad circumstances, Danny Alexander has now replaced David Laws at the Treasury. What are Alexander's views on the CTF?

Back in 2008 I helped organise a seminar with the Lib Dem think-tank CentreForum to discuss the relationship between Liberalism and 'asset-based welfare' - the general term for policies like the CTF which aim to spread assets very widely. (Its not a term I like as I don't think the policy is a matter of remedial 'welfare': I prefer the term 'inclusive assets policy'. But anyway...)

Danny Alexander was the Lib Dem MP who responded to the presentation that Rajiv Prabhakar and I made on 'Liberalism and Asset-based Welfare'. Following the seminar, CentreForum produced a summary of the main points made in the discussion and were happy to put this in the public domain.

Alexander did not repudiate the Lib Dem policy of scrapping the CTF. But his comments certainly indicated that, in his view:

(a) assets are very important part of any strategy to promote social mobility;

(b) Liberals historically have been committed to trying to spread asset ownership, but this commitment has lapsed somewhat;

(c) hence, the general idea of asset-based welfare (inclusive assets policy) is one that Lib Dems should endorse - and endorse as important; and

(d) the Lib Dems need to develop better policy in this area.

Here are his comments as recorded in CentreForum's summary:

Alexander (responding to presentation by Prabhakar and White): 'I am enthusiastic about the possibilities of asset welfare based policies, I feel that returning to this previously held policy would be good for the Liberal Democrats. The UK has both low social mobility and high income inequality. Furthermore research by the Sutton Trust shows that children born in the
1970s are less socially mobile than those born in the 1950s, and that current levels of social mobility are amongst the lowest in the world. This is why these two issues are so key to the Liberal Democrats. Research has shown that there is a link between the empowerment that comes with asset ownership and the ability to transcend one’s social position. So far however Liberal Democrats have seen Child Trust Funds (CTFs) as a gimmick, partially because of the expense and party because of fears about what people will spend their money on. However, if the Liberal Democrats could find a form of asset based welfare that overcomes these perceived problems, it may well help the them better achieve their policy aims of solving the problems of social mobility and income inequality.'

And later in the discussion:

'We can link the CTF into life long savings, for instance, by allowing it to be used as the first
contribution to a pension scheme, or a similar personal account that allows withdraws at other
significant life stages (such as New Zealand’s Kiwi Saver). There are also many other ways of providing asset based welfare that are nothing to do with the CTF, so we don’t just have to decide yes or no to that one policy.'

I am not expecting Alexander to lead a charge to reinstate the CTF. After all, despite his clear enthusiasm for the general idea of asset-based welfare, he did not formally reject his party's policy of abolishing it.

But I hope he won't forget these words now he is at the Treasury. Whatever one thinks of the CTF in particular, creating a genuinely inclusive assets policy that spreads wealth to the genuinely asset poor, rather than just subsidizing further asset accumulation for the already quite affluent (e.g., pension tax relief), should be an urgent priority for any liberal.

Maybe Alexander could put up a note on his computer with the following quotation from the seminar presentation, just to remind himself of this key point:

'The reasons which lead the Liberal Party to campaign for the spread of ownership are political
and social as well as economic….The possession of some property widens a man’s choice and gives him more scope to exercise his talents. Personal ownership is the badge of a citizen as against a proletarian. It is a shield against petty tyranny.’ - Jo Grimond, The Liberal Future, 1959, p.79.


Sunder Katwala said...


Good post. And my congratulations to Danny Alexander and his family: I read in the newspapers that he is the father of a week old baby, his second child. It really doesn't sound like there is going to be much in the way of paternity leave in the new Chief Secretary role ahead of the emergency budget.

Given that he was (unfairly) attacked for not paying capital gains tax when he was not liable for it, I wonder if that makes whether or not to use one of the last full Child Trust Fund vouchers a dilemma for him?

Rather than calling on him to not use it, one would rather that it does help capture why all parents - not just those with means - having the opportunity to invest something for their children does speak to the important liberal principles he spoke of in your seminar.

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