Hamish McRae: IVF babies will not halt a falling birth rate

So, it is test-tube babies to solve the demographic crisis? Well, no, not quite, but it is an intriguing sign of our times that one of the main arguments for state-funded in-vitro fertilisation is that it would be a good deal for the state if it were to boost the UK birth rate. Actually it is quite hard, given the technical difficulties of successful IVF, to see it making that significant an impact.

Whatever the arguments in favour of making the procedure less of a financial burden - and there are many - the key point is that it would not change the overall numbers as much as a shift in social attitudes towards family size. It has been argued that Britain ought to follow the Danish model, which has very good provision, and that it would make financial sense to do so. There is certainly a strong case to be made in economic grounds as well as on moral grounds, but the fact remains that the Danish total fertility rate, at 1.74 babies per mum, remains slightly below the UK one, at 1.78 babies.

All right, maybe if it were not for IVF the Danish rate would be lower still, but you see the point. The UK has a relatively high fertility rate by European standards, though lower than Ireland and France, and it seems to be rising slowly. IVF may have a role to play in increasing it further, but the big determinant of family size is social.

Still we should all be grateful to the team led by Professor Bill Ledger, of Sheffield University, which did the calculations, for highlighting the economic case for larger families. It reckoned that a baby born now would on average pay a net £160,000 more in taxes than he or she would receive in benefits, including health and education costs. IVF would cost £13,000, so the state would be £147,000 to the good.

That is fascinating, because it suggests that young people will have to pay much more into the state than they will receive from it. Similar calculations were published for Germany by the Ifo Institute last December. There the state's "profit" on each baby worked out rather lower, €77,000 (about £55,000), but the German figures allowed for the probability that not all children would have full-time employment, whereas the British ones assumed they moved into jobs at 19.

Whichever figure you take, the fundamental point stands. A rise in birth rates would be good for public finances. There will, I am sure, be political consequences when young people realise that the state is a bad deal for them: that they will have to pay more in tax than they receive in services. The demographic and political dynamics, which for a century have led to an increase in the size of government, will go into reverse. It will be in young people's self-interest to vote for less government, not more.

But that is to come. Meanwhile, it will be powerfully in the Government's interest to encourage people to have larger families. How can they do that?

The best place to start is by being realistic. Fertility rates in some parts of western Europe, notably Spain and Italy, are lower now than they have been at any time, not just in modern history but in the history of our species. That is not something that a Brussels directive can swiftly change. What we are seeing, however, is a focus on tax and other policies to try to make sure that they are not directly family un-friendly. First, do no harm.

Some of these schemes to promote larger families do not look particularly well engineered. I read about a plan in Portugal where people who did not have children would get lower state pensions. While the logic is inescapable - it is the children who will pay the taxes for those pensions - I hardly think the size of their state pension 40 years hence is a key determinant when people try to figure out whether they want kids or not.

Fine-tuning of the benefits provisions for mums does seem to have helped to increase birth rates in France and Sweden. In France, the income tax system does significantly favour larger families, while in Sweden parents get help from grants.

But maybe there should be sticks as well as carrots. The Ifo Institute suggested that people who do not have children should be forced to pay into funded pensions, so that they would in effect pay themselves the money that would otherwise come from the state. But just how you administer such a system raises huge difficulties. How do you cope with the situation when children move abroad, as many young German graduates do? Besides, is it right to penalise people who cannot have children on the same basis as those who choose not to?

Here in Britain we have, in general terms, done quite a lot to help families at the bottom end of the income scale, while people at the top are in general not held back by finance as such. The area that needs looking at is what to do to lower the burden on families in the middle. That is an area where the Opposition should give some serious thought.

But to see this in purely, or even largely, financial terms is to miss the huge complexities of social change. The Pill - giving women the ability to control their fertility - must have been a crucial factor in the plunge in fertility rates right across the developed world that took place between 1960 and 1975. In 1960, every major developed country in the world was above replacement rate. Just 15 years later, every one was below it.

Now, however, there are some signs of a recovery. The United States is just about back to replacement rate of 2.1 babies per mother, having dipped to about 1.75 in 1975, with most of the climb during the 1980s.

The wise way forward, surely, is to try to reinforce social change. If society wants to head in one direction, then the task of the policy-makers surely is to clear the path. That will require a lot of lateral thinking about the interaction between people and the society in which they live. It means looking at everything from planning (should people be told they cannot build an extra bedroom?) to educational quality (if parents want more discipline in schools, should the school provide that?)

For there really does seem to be some evidence, both here and elsewhere in the developed world, of the start of a social shift towards having larger families. It will not change the fundamental demographics in any sudden way, nor the economic pressures of an ageing society. Besides, the evidence is still thin. Nevertheless, there is an intriguing possibility that we may be in the early stages of a modest rise in family size.

The fascinating thing about the IVF debate is the way it highlights the truth that many people are desperately eager to bring more loved children into the world. And if the economic arguments are in favour of the state fine-tuning its own provisions to help people to do so, then that is to the good too.

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