Asset Stripping

On 24 May 2010, after only a few weeks in office, the Conservative–Liberal Democrat Coalition government announced that, as part of a package of measures designed to cut public spending by £6.2 billion, the Child Trust Fund (CTF) would be abolished, saving the government just over £500 million a year. As a result, children born in the UK in 2011 will no longer receive £250 at birth and a further £250 when they reach the age of seven (£500 for poorer families and disabled children). In June 2010, its first budget, the Coalition government also announced that it would not be going ahead with the Saving Gateway (SG) scheme, which was designed to encourage low-income families to save through matched savings incentives and had been scheduled to commence in July 2010.

The Child Trust Fund and Saving Gateway were rare examples of ‘asset-based welfare’ policies. Designed and implemented by central government, these policies offered opportunities for families to build assets that had never existed before. Universal and progressive in provision, the Child Trust Fund was unique and meant that every child in the UK would have an asset from birth.

Yet the scrapping of these policies has been met with very little resistance from the public or policymakers. This paper aims to understand why the government was able to abolish the Child Trust Fund and cancel the roll-out of the Saving Gateway at seemingly no political cost. In doing so, it aims to inform the wider assets agenda – both in the UK and internationally – to build stronger support for new policy ideas in the future.

Based on analysis of available data and literature, as well as interviews with key stakeholders this paper will first provide a short history of the CTF and SG in the UK, identifying the key rationale and drivers for their development. It will analyse the available data on the success and limitations of these policies, and consider the abolition of the CTF and cancellation of the SG.

The argument presented is that the primary reason for both changes was that the policy agenda was built on foundations that were too narrow. There was a perception that there were no direct losers from scrapping the CTF and cancelling the roll-out of the SG; the Labour government never fully integrated asset-based welfare into their thinking, and defined it largely in terms of savings; and there was little support for the programme outside a discreet, relatively small group of policymakers. Other reasons, such as the present government’s approach to spending cuts and a lack of endorsement from the Liberal Democrats, also contributed to the policy’s demise. Long-term policies, like CTFs, require wide and diverse support from the public and from policymakers to survive political change – this simply did not exist.

The need for an assets agenda has not disappeared; arguably, it has only strengthened. There is a growing expectation that individuals will need to (at least partly) fund long-term services such as social care and pensions in partnership with government. And as tuition fees for higher education are also set to rise, it is clear that individuals and families are more likely to need additional savings and assets in the future. This, alongside long-standing issues of high levels of wealth inequality and low levels of savings among low and middle-income households, means that having an asset base is increasingly important.

Through this analysis, IPPR presents lessons from the UK’s short experiment with asset-based welfare policies.

Click here to read the entire paper.