Putting a bit aside for the children

In Britain, the Chancellor of the Exchequer has floated the idea of statetrust funds for minors. Is it a utopian plan or an idea whose time has come?

It would be nice to live in an ideal world. Aside from benefiting from lasting peace and an end to illness around the globe, all citizens would be born equal.

Everybody would enjoy an equal bite of the socio-economic cherry, regardless of who brought them into the world, or where they happened to spend their childhood. Even if living happily ever after could not be guaranteed for all, there would at least be some hope of aiming for material contentment.

It all sounds a bit idealistic, if not impossible, particularly in the fiercely competitive capitalist society that is dear to so many of our hearts. Mention equality and suddenly the spectre of communism rears its head - surely that has already been tried somewhere before? And didn't it fail horribly?

But of course there is always another way of approaching things. When it comes to equality among people, we can think of allotting equal "chances" at the start of everybody's life rather than giving any guarantees of long-term fairness or prosperity. It's a bit like communism without the troublesome communist ideology: people are born equal, but the rest of their life is up to them.

It would be comforting to think that such a society already existed in the State, but we unfortunately have proof to the contrary. Just last week, this newspaper revealed that a soon-to-be published ESRI survey will show that more than a quarter of the Republic's households were living in relative poverty in 2000. While different figures emanate from different sources, it is obvious that not everybody in the Republic starts or indeed finishes life with the same chances.

The difficulty for the policymakers comes in developing a response to this delicate state of affairs, particularly in an economy where prosperity is ostensibly the order of the day. Comfort, if required, may come from the fact that inequality is a universal issue and that other, larger, governments are struggling to address it too.

Consider, for example, an idea that has been floated by Mr Gordon Brown, the UK Chancellor of the Exchequer, who delivered his 2002 budget last week. Mr Brown, long viewed as a future candidate for the British prime minister's job, has for some time been considering the benefits of separating a child's welfare from that of its parents by setting aside a sum of government money every time a baby is born in Britain.

This sum, and the exact amount is still as hazy as the concept itself, would then be invested in various financial products on behalf of the child, who would get his or her hands on it at adulthood.

The result would be that each young adult would, in theory, be allowed to start out on life's journey with the same amount of financial backing in his or her pocket.

It all sounds very generous, and it isn't unreasonable for the phrase, "money for nothing" to spring to mind, at least at first glance. But then we remember that the British Chancellor is not a profligate character - in fact his thrifty, Calvinist background runs absolutely contrary to the notion of free money.

So where does the justification for the trust fund come from?

In last week's budget document, Mr Brown referred to "spreading the benefits of asset ownership" and linked the trust fund proposal with a pilot project aimed at encouraging saving among the less privileged members of society. Both policies are described as "targeted", and both are designed to help to reduce inequality in society.

Most observers expect the trust fund, if it ever enters the system, to amount to about £500 sterling (€815) for each child, while Mr Brown has said the fund should be viewed as an "account" with regular "endowments" or top-ups coming from the government.

These contributions would come at birth, and ages 5, 11 and 16. Children from poorest families would receive most help, the Chancellor has said, thus dismissing any accusations of unfairness regarding the fund itself. The fund would be drawn from taxation, although no exact system to govern this has been developed.

The idea is undoubtedly a novel one, and one with little comparison around the world, save a vaguely similar such initiative in the US.

It is simultaneously straightforward and complicated, however, with the attractions almost clouded by the difficult issues that such an individualised approach presents.

The UK government's intention is to give children "something to start off with in life", according to Mr Paul Dawson, technical director with the Association of Investment Trust Companies (AITC), a financial services industry body.

Unsurprisingly, Mr Dawson's association is an energetic supporter of the trust fund proposal - a mechanism that would automatically create several thousand new investment trusts every year spells big bucks for its members.

"It's a massive opportunity for everyone in financial services," he says.

Mr Dawson believes that Mr Brown, while seeking to foster financial independence within society generally, may also have an eye to saving public money in the long run.

"If everyone's got something to start with, it might in time create a generation that would be less reliant on social security benefits, but of course it could be 20-odd years before that would happen."

One of the most contentious issues surrounding the trust fund idea comes in relation to access to the cash, or the age at which the lucky children in question would come into their money.

The question of restricting what the funds might be used for is also a significant one, with respondents to government consultation on this point evenly split between linking the money to a socially responsible pursuit such as education, and letting the young adults make their own decisions. It was also suggested that restricting uses for the money would be difficult to police.

As for age, 18, the legal age of majority emerged as the favourite, with most respondents against any form of parental access to their child's accounts, aside perhaps from the opportunity to pump in tax-free top-ups.

This is another problematic issue, in that it raises the possibility of some trust funds being more equal than others: what is the point in the whole equalising initiative after all, if parents can step in to skew the system?

Mr Dawson says this is a non-argument, pointing out that some parents will naturally be more generous than others anyway.

"If they're going to be generous, there's just an added tax incentive for them," he says.

As well as looking to the potential for protecting the Treasury's coffers in the longer term, it is thought that Mr Brown is also keen on the idea of linking financial independence to learning about money.

His department has consulted on this issue too, asking respondents for opinions on how to build financial education (or a national sense of thrift?) into the trust funds.

A classroom link was favoured by the majority of respondents, a suggestion that would see the funds being integrated with the national curriculum. Regular government endowments would, it was submitted, help to keep children's interest alive. Meanwhile, birthday cards from the fund could even arrive along with those of grannies and aunties.

All in all, it is hard to argue against the intentions of the trust fund: the population becomes more financially independent, thus contributing to the common good by saving the state money in the long run. The question of whether it is worth considering in the Republic is still hard to answer, however. Fine Gael spokeswoman on equality, Ms Frances Fitzgerald, for example, describes the trust fund proposal as an "interesting manoeuvre". She says however that the fund represents a "hierarchical approach".

"The principle is one of valuing childhood, but maybe we could value it more by making these resources available when the children are younger," says Ms Fitzgerald. "We have a lot of work to do in this area in the here and now."

More positive is Prof Brian Nolan, the author of the aforementioned ESRI report, and authority on child poverty. Prof Nolan says the trust fund proposal is about "redistributing wealth and life chances" and believes it is a good idea, at least in principle.

He says one potential problem could come in dealing with children who would "miss out" on the fund because they were born too early, but argues that this could be addressed by introducing the idea on a phased basis.

Prof Nolan also cautions against a trust-fund system being used as a substitute for Government-funded third-level education.

"The context in which it is done is very important," he says . "But if we're talking about something that becomes available to an 18-year-old, I can't really see any downside to it."

The benefit of letting one's nearest neighbours take the plunge first is key, however, says Prof Nolan.

"In principle, it is a good idea, but in the real world, we would want to look at how it works. It could make a difference, unless the State simply clawed it back at a later date."

As for Mr Brown, he said last week that he would continue to research the trust-fund proposal and would return to it by the time next year's budget came around. In the meantime, Irish policymakers can watch that space.

Check out the trust fund proposal on www.hm-treasury.gov.uk

Gordon Brown profile, page 20

IN the run up to a general election, it is only natural that the competing political parties would try to outdo each other on the policy front. The issue of financial provision for children is no exception to the rule.

FIANNA FÁIL

Fianna Fáil claims to view child poverty as a key priority and points to substantial increases in the rates of child benefit while the party has been in government.

The party's "priority focus" is towards awarding €127 per month in child benefit for third and subsequent children.

FINE GAEL

Among other things, Fine Gael promises to introduce a €300 "infancy grant" to parents of new-born babies, a sum aimed at defraying the immediate costs of bringing a baby home.

Other proposals include childcare tax credits, pre-school capitation grants and new funds for playgrounds.

LABOUR

If elected, Labour pledges to provide an "Early Years Care Subsidy" of €50 a week for parents of children aged under three.

Free pre-school would also be offered to all children, while registered childcare facilities would be subsidised by the State. Current child-benefit policy would remain.

PROGRESSIVE DEMOCRATS

The PDs want to combat educational disadvantage through "targeted investment" and an upgrade of school buildings.

The party promises to fund 40,000 new childcare places and to raise child benefit to €150 per month.

SINN FÉIN

Sinn Féin wants "the rights of children and parents to affordable, accessible quality childcare" to be recognised and supported by the State.

This should, the party says, include childcare tax credits for all mothers and community-based after-school care.