|The Campaign for Universal Inheritance|
|FOR GREATER EQUALITY OF OPPORTUNITY|
Appendix 1Baby Bonds and the Taboo
Baby Bonds, or Child Trust Funds, are a cynical distraction by the New Labour government from the taboo subject of the re-distribution of inherited wealth. They are all spin and no substance. They sound good now, but will have little or no effect upon equality of opportunity - and certainly not for 18 years or more. This is not surprising, since the original thrust of creating greater equality of opportunity was lost when the proposal was taken over by the Savings Incentives Team in the Treasury. There was no Greater Equality of Opportunity Team in the Treasury. The taboo on the re-distribution of inherited wealth must be broken. Politicians must lead public opinion, not follow it.
Having argued for Inheritance for All(1) and Universal Inheritance(2) since the Liberal Party Assembly in Edinburgh in 1972, it is clear that Old Labour never liked the idea. What? Turn every 25 year-old into an owner of capital? They might stop voting Labour! Nowadays it is the New Labour government which does not like the idea. Are they concerned about their wealthy donors? It is extraordinary how this government has ignored Universal Inheritance, even though the Fabian Society has proposed it recently as "A Capital Idea"(3).
Baby Bonds will cost money now with no immediate benefit apart from sound bites. By contrast British Universal Inheritance will benefit all 25 year-old British-born citizens immediately it is introduced. It will be broadly financed by sensible reform of taxation on inheritance and will transform our country. The annual cost will be merely the current paltry £2.5 to £3 billion revenue from the present exemption-riddled Estate Duty-type Inheritance Tax. Apart from as-yet unborn babies reaching the age of 18, Baby Bonds would benefit no one except for spin doctors and financial and investment advisers. The latter are of course strongly in favour of them, as they made clear to the Savings Incentives Team in the Treasury.
The New Labour government dares not break the taboo on discussing the redistribution of inherited wealth. So they propose that every baby will receive the Baby Bond, regardless of whether he or she goes on to inherit £billions, £millions or nothing during their lives. This will of course be electorally popular with the middle class voters New Labour seek to attract, since their babies will get money even if they they did not need it. British Universal Inheritance, on the other hand, will be a net benefit directly only those who receive less than £90,000 by way of inheritance or capital gifts from other sources. But the indirect benefit to all is far wider.
To counteract the suggestion of unfairness - while ignoring the question of the distribution of inherited wealth - Baby Bonds are to be means-tested according to the accident of what parents' income happens to be at the time of the baby's birth! So, ludicrously, all babies are to receive £250, regardless of whether they will inherit a vast fortune - often tax free - or nothing at all, and a further £250, "means tested" according to whether the parents just happen to be on income support at the time of the baby's birth. By contrast, British Universal Inheritance will be effectively means-tested by reference to the cumulative lifetime total of inheritance and capital gifts already received or to be received in the future.
Universal Inheritance will be truly universal. All will receive from the State or other sources at least the same minimum amount of capital of £10,000 before tax by the time they are 25. Baby Bonds, on the other hand, having started off between £250 and £500 at birth, will vary in value between very little and very large amounts when the babies reach the age of 18 - depending upon top-ups from better-off parents and relatives and upon investment skills.
Now the New Labour government has so cynically introduced Baby Bonds, because they are not prepared to break the taboo on the redistribution of inherited wealth, at least a more enlightened government in the future will be able to incorporate the varying proceeds of them at 18 as just another source of inheritance or capital gifts within the British Universal Inheritance framework. When the baby reaches the age of 25, the maturing Baby Bond will be boosted in value if it has grown to less than £90,000 or alternatively taxed at 10 per cent on the amount by which the value exceeds those figures.
Hopefully British Universal Inheritance will soon be introduced, so that Baby Bonds can be forgotten about as an irrelevant distraction and a foolish 'good news story'. The taboo on the re-distribution of inherited wealth will be broken, and Universal Inheritance will be to the 21st Century what Universal Suffrage was to the 20th, transforming our and other open democratic capitalist countries.
(1) Dane Clouston, New Outlook, Inheritance for All - (1976) (2) Dane Clouston, Campaign for Universal Inheritance, Universal Inheritance - (1998) (3) David Nissan and Julian Le Grand, Fabian Society Policy Report 49, A Capital Idea - (2000)