Bringing back baby bonds
Bill Jamieson wrote a Sunday Telegraph story titled “Your starter for £1,000” on 31 December 1995. It discussed the Adam Smith Institute proposal for ‘baby bonds’ or ‘Fortune Accounts.’ When the IPPR copied the idea in 1999, without reference to the ASI’s earlier publication, Jamieson directed them to his 1995 story and published the fact.
A version of it was implemented by the Blair government. it was called the Child Trust Fund, launched in 2002 and scrapped in 2010. It would undoubtedly be a very popular policy, were it to be given another go in the way I outline.
Each newborn child would have £1,000 put into an investment account in their name, but no withdrawals could be made until age 18. Money paid in by family or friends would be tax-free and contribute to its growth.
Assuming a broad stock market investment averaging around 7% annual real returns (roughly the historical long-run average):
£1,000 invested at birth would reach £3,380 in real terms by age 18
If family or friends added even a modest £50 a month, that pot would grows to roughly £22,000-£25,000
This could be genuinely life-changing money for a young person, enough to contribute to university fees, a house deposit, or seed capital for a small business.
The government would not need to find the cash immediately. With about 600,000-650,000 births per year in the UK, the annual liability would be roughly £600–650 million, but spread over 18 years before it became liquid. In accounting terms the liability accrues gradually, and the government could fund it through bonds or simply budget for it annually as a standing commitment. It is not trivial, but it is well within the scale of existing welfare commitments.
Its effects would be far-reaching. The biggest impact would be at the bottom. Wealthier families already pass on assets; this would give poorer children a baseline stake in the economy.
Evidence from the Child Trust Fund era showed that even having an account in a child's name increased families' engagement with saving and investing.
The tax-free top-up feature would inevitably benefit wealthier families more because they have more spare income to contribute. A government top-up might be proportionally larger for lower-income children to counteract this. The original CTF did this to a degree.
A cohort of 18-year-olds receiving lump sums simultaneously each year could stimulate consumption, though staggered by birthday it would not cause a single shock.
Economist Alistair Darling's CTF and later proposals by figures including Stuart White and David Nissan argued that asset ownership changes behaviour and aspiration, not just income. A person who owns a stake in the economy from birth has a fundamentally different relationship with it than one who does not. It is essentially a form of pre-distribution rather than redistribution.
It could constitute a backdoor abolition of Inheritance Tax, Britain’s most hated tax. Parents and grandparents could put their estates tax-free into the trust funds for their children and grandchildren.
The policy has cross-ideological appeal because those on the right can frame it as promoting individual capital ownership; whereas left-wingers can frame it as tackling structural inequality from birth.
It is a policy that a Reform-led government could implement to wholehearted support and applause. It is one that would yield structural change and attitude rippling across the generations.
Madsen Pirie