In brief
‘Assets for all’ – a new pillar of welfare?

The Institute for Public Policy Research (IPPR) had cause to celebrate when in April the Government launched its consultation paper Saving and Assets for All. Last year the IPPR proposed a scheme whereby a lump sum should be invested for all children at birth, to be available at 18 for, for example, training, housing or setting up a business. A number of press reports speculated that ministers, in particular Gordon Brown and David Blunkett, were interested, but the launch of the consultation paper took many by surprise.

There are two main proposals: a new Child Trust Fund, with a lump sum invested at birth and further payments at 5,11 and 16; and a new Savings Gateway – a guarantee to match the tax-free savings made by individuals with funds from the Government.

The Government has a number of motives for wanting to encourage saving. Increasing financial independence, opportunity and ‘inter-generational mobility’ are high on the list. But ministers are attracted also by the perceived ‘behavioural’ effects of saving: for example, ‘greater self reliance, forward-planning and an increasing willingness to make personal investments’.

The objective of helping people to save, when they can do so, is right in principle. Not least, the proposals acknowledge, and are a response to, the growing wealth divide in the UK. However, CPAG’s concerns include the assumption that low-income families can afford to save, but simply lack the ‘incentive' to do so. The consultation paper suggests that factors such as incentives, information and access are more influential than personal characteristics, even poverty. This will surprise many families struggling on low incomes, not least those on income support which, despite recent increases in allowances for children, remains below the Family Budget Unit’s ‘low cost but acceptable’ budget threshold. It will also no doubt surprise the 85 per cent of lone parents receiving income support who are repaying social fund loans.

The assumption that the poor can save is based, in part, on initial findings from asset-based pilot schemes in the United States. Because participants are saving researchers conclude that this is the result of incentives and that the poor have the capacity to save. However, the researchers admit that there is insufficient evidence to determine whether what is being saved is new savings. Are people borrowing from Peter to save with Paul? How relevant is the impact of the massive cut-backs in state welfare schemes (for example, time-limited provision and compulsory work or training)? What better ‘incentive’ do you need than the alternative of destitution?

In seeking to tackle poverty and financial exclusion, there are dangers in making bold assumptions, particularly about ‘behaviour’, that are not adequately supported by evidence.

Martin Barnes, CPAG

Poverty 109, Summer 2001