Johann Hari: In defence of baby bonds: a totemic policy for an age of spiralling inequality

The Government always keeps its left-wing side hidden in case it scares the Middle England horses

Whenever one of the Government's (rare) left-wing policies stumbles slightly, the British press and politicians invariably inflate and hyperbolise the problem into a crisis, a disaster, a humiliation - and nobody answers back. Sure, the government mumbles something in response, but they basically want to keep their decent, left-wing side hidden from public view in case they scare the Middle England horses. The rest of the left is so angry with the government on other issues that it says nothing. Is it any wonder most people know nothing about the good things the government is doing?

This week provides us with a juicy example. The right is gleefully claiming that the Government's policy of baby bonds has suffered a cot death. The policy is simple: over the past year, the government has given each newborn baby a voucher to open a trust fund with. If the baby is born to a poor family, she gets £500; the rest get £250. Parents can add to the fund throughout childhood, and the government will match them pound-for-pound. The result? When the kid turns 18, the account will contain thousands of pounds. They can use the money to pay their way through expensive work experience, start a business, backpack around the world, or just blow it on a wild month of drink and drugs. It won't only be the children of the rich who get this opportunity on their eighteenth birthdays - everybody will.

If this sounds like a gimmick, you have to look at the wider context to see why it is so important. We all know that income inequality in Britain stands at shocking levels - but how many of us know that asset inequality is twice as bad? In this country, the bottom 50 per cent of the population own just 6 per cent of the country's assets. A majority of single parents, immigrants and working-class people have no savings and own no assets at all.

Owning next-to-nothing changes your whole life in subtle and unpredictable ways. The Institute for Public Policy Research conducted a long-term study that found that people who owned assets at the age of 23 were far less likely to be broke, depressed or divorced at the age of 33. Researcher Dominic Maxwell explains, "At first the results seemed odd. Why would owning assets affect the stability of your marriage? But then we realised they give you a stable base to stand on. Assets mean you are far better equipped to withstand the shocks life throws at you."

I remember seeing this at University: the kids from rich families with assets in the bank were far more confident, and they were in a far better position to make themselves rich in turn. Those of us who lived on the edge of our overdrafts were more neurotic, less adventurous, and always aware we were only one job-loss or one screw-up away from disaster. The baby bonds approach - of spreading assets across British society, and giving everyone a buffer-zone of savings - is a brave, long-term attempt to begin to turn this around. Politicians are very rarely this far-sighted: the first beneficiaries of this policy will emerge in 18 years, and will probably have never heard of Tony Blair and Gordon Brown.

So why are the policy's critics trying to toss dirt on to its premature grave? Of the 1.7 million vouchers that have been sent out so far, only 499,000 have been cashed in. This prompted the ugly Thatcherite wing of the Liberal Democrats to crow, "Gordon Brown's flagship policy has been a flop with parents. Our fear is that young people will blow the proceeds of their fund at 18 anyway". The Tories echoed this acidic sentiment. But is this true? The baby bond vouchers are sent out to mums just after they give birth, when they have a screaming, howling, helpless small person to deal with. Given that the funds won't be available for 18 years, it's hardly surprising if they let this slip to the bottom of their to-do list. But if the policy is not sold by the government - and sold hard enough to build up broad public awareness and support - then baby bonds will be abolished, as an easy cost-cutting measure, when Labour one day loses power.

Letting baby bonds die would be particularly sad because they are an important philosophical weathervane, a sign of where progressive politics should be heading. For most of the 20th century, the left - and particularly the Labour party - believed the problems thrown up by raw markets should be dealt with through collectivism. Their solutions were clear: take institutions out of private hands and transfer them to the ultimate collective institution, the state. But for ordinary people (and especially the poor), this often simply transferred their problems from one remote institution to another. Collectivism turned out to be unpopular and inefficient, and its death was seen - disastrously - as a victory for the Thatcherite claim that the state should do little or nothing and leave everything to raw market forces.

But there was always a better alternative to either collectivism or Thatcherism. This "third way" (I know, I know, try to pretend I didn't say that) is usually given the ugly label of "distributionism". Distributionists have always believed that the job of government is to actively - as a matter of policy - spread wealth and property as widely as possible throughout society. For them, the problem is not the existence of private property, as much of the left had assumed; it is the grossly unfair distribution of property. In the early 20th century, there was a strong distributionist movement, headed by men such as G K Chesterton. He declared: "If property is good for Man, it is good for Everyman." Baby bonds are a classic distributionist policy: they spread property and assets to every citizen.

Of course, Thatcherites have claimed for decades they want this too. They have talked about a "property-owning democracy" where everybody has a portfolio of shares. But the market does not spontaneously spread wealth down to people at the bottom: during the years of Tory government, the number of people with no assets and no savings doubled. The right's commitment to small government, low taxes and no interference with markets means they can never deliver this promise. They are left with a glib Marie Antoinette capitalism, declaring "Let them buy shares" to people who can barely afford a holiday.

This opens up serious political space for the Labour Party. Yes, the old-style state-collectivist dream is pretty dead - but the distributionist dream still has incredible power in an age of spiralling inequalities. Only big government, prepared to raise taxes and intervene in existing property relations, can spread wealth across a society and make sure everybody can participate in markets.

A century ago, distributionism was trampled to death. But today, in small, revealing policies like baby bonds, it is being reborn. It offers us a hint - just a hint - of a persuasive future for the centre-left.

j.hari@independent.co.uk