Professor Julian Le Grand on how the Baby Boomers can give back their children's future
In one of the publications where I and colleagues put forward the idea of a universal capital grant for every child - a proposal that eventually became the Child Trust Fund - I suggested that the grant be financed by hypothecating the revenues from the inheritance tax (1). That way, the wealth of one generation could be spread around so as to fertilise the growth of the next.
Government funding of the Child Trust Fund is (one hopes, temporarily) suspended. However, the idea of setting up children's accounts that seed future savings and asset-building is still on the policy agenda with some current proposals for preserving the infrastructure of the Fund, or, more ambitiously, in an important new ResPublica publication
by Phillip Blond and Sandra Gruescu (2), for the whole CTF to be transformed into an Asset Building for Children (ABC) account. It is therefore worth thinking about how future government contributions to CTFs or ABCs might be funded - and therefore to return to the inheritance tax idea.
There were close to 800,000 births in the United Kingdom in 2009. In 2009/10 inheritance tax revenues amounted to £2.4 billion. If all of that revenue had been used to fund a capital grant to every child born, the grant would have been £3000: a tidy sum that parental and other contributions, together with the magic of compound interest, could have created some very sizeable capital endowments by the time the child turned 18.
But the real merit of the idea lies, I think, in its political appeal. Many people deeply resent inheritance tax. The Child Trust Fund has support, but not always very wide or indeed very deep. Yoking the two together in this way could enhance the popularity of both. As David Willetts has pointed out (3), the baby boom generation has accumulated considerable wealth, along with some guilt at the series of lucky events that have contributed to their acquiring it. Here is a way of assuaging that guilt while pursuing a noble aim: that of helping all young people to grow and thrive.
Julian Le Grand is Richard Titmuss Professor of Social Policy at the London School of Economics
(1) See J.Le Grand Motivation, Agency and Public Policy
(Oxford University Press 2003, 2006) for a history of the idea
(2) P. Blond and S. Gruescu Asset Building for Children
(3) D.Willetts The Pinch