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Programme highlights Thursday, 26 April, 2001, 13:47 GMT 14:47 UK
Blair's baby bond pledge
Tony Blair and David Blunkett
Ministers say the initiative will promote saving
The idea of a baby-bond worth up to 500 is one of the keystones of Labour's re-election pitch.

But is it a radical attempt to break out of a never-ending cycle of poverty? Or a flagrant attempt to woo voters with a free Government hand-out?

This morning, at an elaborate multi-minister launch featuring Alistair Darling, David Blunkett and Gordon Brown, Tony Blair described the bond as a way of offering everyone a financial stake in the society in which they live.
Alistair Darling
Social Security Secretary, Alistair Darling

The means-tested endowment will go into a special tax-free trust fund, to be topped up at ages 5, 11 and 16. Family members and others can also contribute to the fund, which is then available to the young person on his or her 18th birthday.

Today Mr Blair said: "By the time they are ready to start life on their own, every child in every family in every home across the country will have a sound financial platform which could help pay for lifelong learning, training, owning that first home, setting up a business."

Ministers apparently toyed with the idea of restricting the way the money could be spent, but decided that this would send out the wrong - nannying - message. So 18-year-olds might do any or all those things Mr Blair suggests, but of course, they might not.


a financial platform which could help pay for lifelong learning, training, owning that first home, setting up a business

Tony Blair

The other ministers on the Downing Street platform added more detailed descriptions of the scheme. The Chancellor, Gordon Brown, acknowledging that today's launch was just the beginning of a consultation process, said that the initial endowment would range from 250 to 500.

By the time a child was eighteen, the amounts contributed by Government would be a maximum of 800.

And Mr Brown announced a second scheme aimed at less well-off families, described as a savings gateway: the Government would match - pound for pound - any savings up to 1800. This money, too, could be placed tax-free in a child's trust fund.

Afterwards, Gavin Kelly, Senior Research Fellow at the Institute for Public Policy Research - the think tank which devised baby bonds - told the World at One that by 2019, the maximum endowment of 800 might be worth 1600 on the basis of simple compound interest.

Quite small additional savings along the way could raise that total considerably.

But many important questions remain to be answered.

No details have been given of how the means-testing will work: what would be the income-threshold for the top level of endowment?

How would the system be policed, to make sure the funds aren't bought and sold long before a child reaches 18? Should there be any control over how the money is finally spent?


this is money that has been raised from the poorest in society

Michael Portillo, Conservative
And the political response? The Conservatives say they aren't prepared to commit themselves one way or another on the baby bond scheme until they've seen the full details, though the Shadow Chancellor, Michael Portillo, has already poured scorn on Labour's motives.

The leader of the Liberal Democrats, Charles Kennedy, told the programme that his party would respond constructively to the proposal, but that there were two points to bear in mind.

He said there was a little "gimmickry" about the announcement and that, by the time today's newborns reached 18, any cash saved would be just enough to make a small dent in student tuition fees.


there is a little sense of gimmickry about this

Charles Kennedy, Liberal Democrat

The savings figures are certainly disheartening: the proportion of people with no financial assets doubled between 1979 and 1997. it's now believed that 7 out of 10 lone parents - and half of all people on lower incomes - have no savings.

The reason is blindingly obvious. Most have no spare money.

The child fund - and the savings gateway - are supposed to help people to help themselves, in line with the philosophy of the New Deal. But, rather more crudely, they are also supposed to make people feel warmly towards Labour.

Damon Gibbons, Chair of the anti poverty campaign group, Debt on our Doorstep- told me that the problem of financial inequality would need a bigger solution than one initiative.

However, the Social Security Secretary, Alistair Darling told the programme the savings plans were to compliment those other Government projects which are designed to combat existing poverty. Click on the box above left to hear the full interview.

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Damon Gibbons of Debt on our Doorstep
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Alistair Darling, Social Security Secretary
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