July 3, 2009


The new Conservatism can create a capitalism that works for the poor: State expenditure and redistribution has done little to end dependency. We need a fresh approach that gives assets to all (Phillip Blond, 7/02/09, guardian.co.uk)

David Cameron recognised all of this and spoke at Davos early this year of the need to recapitalise the poor and create a capitalism that works for all. The key political aim of this truly transformative conservatism must be the generation of an asset effect for the decapitalised bottom half of society. Assets must, however, come from somewhere, and since redistribution and expenditure via the state has such a poor record in alleviating dependency, a fresh approach is required. Welfare or public expenditure should move from a spending to an investment model. The aim must be to free the poor from welfare subsidy through the generation of asset independence. The following are some ideas as to how this might be achieved: [...]

2 The capitalisation of welfare streams. The only real viable source for welfare capitalisation is housing and child benefit. Councils have used their housing stock to generate cash income for benefit dependency for generations. By constantly raising rents, councils have created housing that the working poor cannot afford. Some sort of redress is required – a capital or asset credit, financed by a council bond, should be applied to those whose long-term benefit has, in effect, subsidised council receipts. This credit should be a tradable asset that, when conjoined with other new ventures such as community shares or social investment, can generate an asset effect for those whose routes out of poverty are presently so curtailed.

Similarly, child benefit should be means-tested, and the savings applied to a government matching programme for child trust funds for the lowest income groups. Studies by the Children's Mutual show that if the government matches the deposits of the poorest families, at age 18 the values of those funds for the poorest will be at the national average – currently £10,000. [...]

5 Create a more dynamic and self-managed universal pension. In order to encourage earlier saving, let people access their pension fund to buy a first house or fund education – let the pension become a multi-applicable vehicle to generate other non-speculative and carefully constrained assets. Initiate a good advice service for general public pensions: this would enable people to eliminate management costs and self-manage their own provision, producing a pension pot on average 75% higher than current returns..

Posted by Orrin Judd at July 3, 2009 2:10 PM
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