Blair Babes

Cambridge 2000 memos

April 2001

The wonderful "thinkers" in the Labour government have come up with a classic wheeze called the "Baby Bond" (a.k.a. the "Child Trust Fund" or CTF). Every baby will be given at least 400 pounds (250 at birth) and some lucky ones will be given 800 pounds (500 at birth) with the offer of even more if parents or other relatives also contribute. The details are sketchy because it is such a complicated idea that the government has not yet come up with all the details. In theory the child will be able to cash the savings in at age 18 (or perhaps 21).

Why this particular idea? Well the government is always trying to convince people it is "doing something" (especially for "the poor") but does not want to actually spend any money for fear of alienating the people who actually have to pay the bills. The "Baby Bond" will "only" cost around 500 million pounds a year (at an estimate) and everybody who has a baby will be happy to accept this bribe. Everybody else will hardly notice the extra few pounds going out in tax to pay for it. This kind of cynical policy was turned into an art form by Thatcher, and Blair is just following in her footsteps.

What is wrong with this particular idea? Well by far and away the best way to do something for any child is to give them a decent education, this will set them up for life. The people who rule Britain recognise this perfectly well because most of them send their children to private schools, and those who do not instead send them to the best state-funded (if not state-run) schools, which they are able to arrange because of their connections (Blair is a prime example, his children do not go to their local school, which is not good enough for them).

800 pounds would be far better spent on the child at age 5 and not at age 18. At 18 it is too late to learn to read and write. Unfortunately just spending money on education does not create headlines or increase Labour sympathy amongst the voters, far better to bribe them in a way they will recognise straight out as a bribe.

What else is wrong with the "Baby Bond"? It is going to be very costly to administer. This is great for the civil servants in Whitehall but not so great for the British taxpayer. Whether you get 500 pounds at birth or 250 will depend on a means test, so yet another complicated set of forms will have to be created and vetted by yet another army of civil servants.

Whatever definition of poverty that is arrived at, there will inevitably be anomalies. What if a family is "poor" when the baby is born because of temporary unemployment, but then are no longer "poor" a few months later. Will the extra 250 pounds have to be given back? And vice-versa? Are we going to have means tests every year (or two or five) in order to see what the "correct" state contribution is supposed to be? This is incredibly expensive but anything else would be incredibly unfair.

As part of the propaganda put out by the government it was suggested that the child could end up with a large amount of cash at age 18. This relied on the assumption that the money would be invested in the stock market with returns around 5% above the rate of inflation. Who is going to take responsibility for deciding whether the money should be invested in the stock market or in a bank? Presumably the parents. This will mean a whole army of inexperienced investors being sold crackpot and expensive investments, all to the benefit of the City of London but nobody else. What is the government going to do when some of these investments go bust or underperform, bail out the children or say "tough luck"?

It is also not clear what the child will be allowed to do with the money at age 18. One possibility is anything they want, which seems eminently reasonable, only at age 18 many of them will blow the money on drink or drugs, and even if not that then on a holiday or car. Is this what the government is keen to promote? Should the current taxpayer be funding these activities? 2022 could well be remembered as the Year of Ecstasy, and not because England win the World Cup.

An alternative would be for the government to specify what the money can be spent on. This is even worse. Yet another army of civil servants and undoubtedly eminent committees deciding what is a "moral" use of the money and what is not. This is State interference gone mad, but is a logical outcome of the exercise. "Education" is good, "holidays" are bad, "educational holidays" are ...

What will be the arbitrary and magic cut-off birth date after which you will be entitled to the money and before which you will not? Is it fair or reasonable that children born on 31 December 2003 will get nothing and children born on 1 January 2004 will get 400 pounds? Obviously not. Yet more complications. Of course we were all babies once and the only logical conclusion is that we should all be given our "entitlement" at the start, so there is no arbitrary cut-off date. Put up or shut up Blair.

What will happen if you are British but born abroad because your parents happen to be working in Paris for a year or two. Will you get the money? What will happen if you are born in Britain of American parents because they happen to be working in London for a year or two. Will you get the money? What will happen if you are British and born here but leave the country at age one. Will you get to keep the money? What happens if you die before age 18, who will inherit the money?

What will happen if you commit a (serious) crime before age 18. Will the money be taken away from you? Should the current taxpayer fund future murderers and rapists? Presumably not, so yet another complication. Some eminient committee will have to decide for what crimes people will have their entitlement taken away. Needless to say the future judiciary system might take another view.

Far better to spend this money on education. It's simple and it works.

[ Update: In the budget of 9 April 2003 the government announced that it would go ahead with this scheme. At that time there were no further substantive details except that the cut-off point for eligibility would be September 2002, and around a third of children would be deemed to be "poor", so eligible for the larger handout. Tough luck for those people born in August 2002. ]

[ Second update: On 28 October 2003 the government announced further details. The "poverty" threshold would be determined by the Child Tax Credit threshold (at least one sensible proposal). The scheme is so complicated that money will not start coming until 2005, before that parents have to put up with vouchers. The second tranche of money (for an unspecified amount) will come at age seven. Friends and families are allowed to add up to 1200 pounds per year extra into the scheme and there are tax benefits which mean that in the end as usual rich kids will do best from the scheme, and the people in the middle will fare the worst (especially those without kids, of course, who are paying most for this scheme). For further details visit the government website. ]

Cambridge 2000 memos