THE SOCIAL JUSTICE CHALLENGE OF ASSETS: A PROPOSAL

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THE SOCIAL JUSTICE CHALLENGE OF ASSETS A
PROPOSAL

• Britain and Europe in the Global Age Common
  Challenges, New Opportunities
• Policy Network, London, 18th Jan 2007
• Julian Le Grand
• London School of Economics

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Investing in Youth

• Almost all EU member states direct investment in
  youth goes into education and training.
• One fifth of 18-24 year-olds receive little or no
  investment of any kind.
• Largest investment goes to better off.
• Youth have few capital assets, especially from
  poor families. But evidence suggests that small
  amount of capital can make big difference to
  start in life and adult outcomes.

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Assets and Outcomes

• Evidence that individuals who own assets,
  compared with those who do not, have
• Better health
• Lower mortality
• Higher marital stability
• Less domestic violence
• Better educational outcomes for children
• Higher savings

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Assets and Youth

• Asset holding at 23 has strong links with
• Time spent in full time employment between 22-33
  for men and women
• Earnings at age 33 for men
• Health of men and women at 33
• Links remain even when income, class and
  personality type controlled for.

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Investment in youth capital grant schemes

• Tom Paine 15 for every 21 year old paid from
  inheritance tax
• Le Grand and Nissan 10,000 at 18, funded from
  by inheritance tax
• Institute for Public Policy Research 1000 grant
  at birth funded from general taxation
• Ackerman and Alstott 80,000 at age 21 funded
  from wealth tax
• Italy, Hungary, France, Canada all
  considering/have introduced schemes
• UK Child Trust Fund

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UK CHILD TRUST FUND

• Every child born in UK receives a grant of 375
  euro (equivalent) to set up a trust fund account.
• Children from poor families receive 750 euro.
• Parents, grandparents, friends and children can
  save up to 150 euro a month into account. Income
  from account tax free.
• Government pays in a further 375 euro at age 7
  (750 euro for poor families).

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CHILD TRUST FUND

• Money can be invested in savings accounts, or
  shares. Can choose from funds offered by 40
  financial institutions. Government will invest it
  if parents dont take it up.
• Account available for use when child reaches 18.
  No restrictions on use.
• Financial help and education available

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Views of Parents in Deprived Areas

• Approved of the policy

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Parental Approval

• Parent A 250 is a nice little starter and 500
  you cant complain, can you?
• Parent B Suppose, for some sad reason, I stay
  on benefit for the next 18 years. Im still not
  going to have 250 that Im going to be able to
  give my child on her 18th birthday for a present.
  And the Government is going to give her 500

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Views of Parents in Deprived Areas

• Approved of the policy
• Preferred it to be spent on Child Trust Fund than
  on education or child benefit

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Preferred spending on Child Trust Fund to
education and child benefit

• Parent C Im totally against that spending on
  education because I think weve paid in for
  years to taxes that should have gone in for
  education anyway
• Parent D I prefer the voucher because my child
  benefit gets spent on her nappies, her clothes,
  her this and her that. Shes not going to see the
  benefit of that when shes older, is she?

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Views of Parents in Deprived Areas

• Approved of the policy
• Preferred it to be spent on CTF than on education
  or child benefit
• Supported the fact that it was locked away

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Supported its beinglocked away

• Parent E I think thats good because it would be
  so easy for children or parents just to dip into
  it. I think its good that it stays there for 18
  years, and they cant touch it.
• Many parents would prefer it to be locked away
  for longer!

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Views of Parents in Deprived Areas

• Approved of the policy
• Preferred it to be spent on CTF than on education
  or child benefit
• Supported the fact that it was locked away
• Supported its universalism. Didnt like the
  means-tested addition (even the poor)

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Parents approved universalism

• Parent F
• I think everyone is the same at the end of the
  day. Why should people like me who are on income
  support get 500? I know its my child but just
  because Im on a lower income shouldnt mean you
  get more money. I think everyone should be
  treated the same.

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Views of Parents in Deprived Areas

• Approved of the policy
• Preferred it to be spent on CTF than on education
  or child benefit
• Supported the fact that it was locked away
• Supported its universalism. Didnt like the
  means-tested addition (even the poor)
• Encouraged them and others to save

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Encourages savings

• Parent G
• The first child got money for birthdays,
  Christmas, christening and so on. And that just
  went.You always found something to spend it on.
  For her (the second one) all that money has gone
  into the child trust fund account. And now,
  when her birthday comes, Ive said to the
  godparents that I dont want any more toys or
  clothes. Instead Ive given them the account
  number and told them to do what they want.

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Views of Parents in Deprived Areas

• Approved of the policy
• Preferred it to be spent on CTF than on education
  or child benefit
• Supported the fact that it was locked away
• Supported its universalism. Didnt like the
  means-tested addition (even the poor)
• Encouraged them and others to save
• Mixed views about restrictions on use

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A Euro Demogrant

• A euro account set up with 500 euros for every
  baby born.
• Money could be invested in shares, government
  bonds or saving accounts
• The child could access the account when he or she
  was 18 (21?).
• Parents could save into the account, but not take
  money from it.

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Challenges

• Age of receipt at birth or on maturity?
• Universal or means-tested? Targeting by member
  state? (400-600 Euro)?
• Restrictions on use?
• Higher education or other training
• Towards house purchase
• Small business
• Pension fund
• Cost

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Cost

• 4,792,600 births per year in EU 25 in 2004
• Total annual cost at 500 euro per child 2,400
  million euro.
• 0.02 of EU 25 GDP.
• 2 of EU budget.
• Savings to member states on other budgets,
  especially higher education and social insurance

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A Euro Demogrant

• A way of investing in youth that
• Promotes higher earnings, employment, health.
• Helps savings and savings habits.
• Helps the less well off as well as the better off
  (unlike education)
• A noble enterprise. Universal across Europe.
  Contributes to European citizenship

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Title?

• Euro demogrant
• Euro baby bond
• Euro endowment
• Euro bond
• Euro dotation
• Bambini dotie..