Spreading capital ownership more widely early in life would represent a huge stride towards making capitalism acceptable

There has never been anything wrong in itself with the idea of either private wealth or its derivative, investment or "unearned" income. The main trouble is that too few of us have it.

This theme has been a recurring one in Economic Viewpoint and in my larger works for a long time. When North Sea oil first came onstream in the UK, I wrote with Barry Riley a paper urging the distribution of the state revenues from North Sea oil as a "dividend" to all adult British citizens. Just such a social dividend has in fact been paid to Alaskan citizens.

Later, during the Conservative privatisation drive, I urged that instead of being sold at cut prices to stock exchange investors, shares in the nationalised industries should be distributed "free" to all adult citizens. This would have been both a nest egg and a way of accustoming people to handling financial capital.

After that, I was toying for a long time with the idea of a basic or citizen's income available unconditionally to all. This would help top up the pay of unskilled, unlucky, or starting workers who would thereby be able to take low-paid work and still be better off than on the dole. Alternatively, they would be able to opt out for a time from the rat race and become artists, gypsy- scholars or even - like Leonardo di Caprio in the recent film - go back-packing in search of the perfect beach. The person who did most to bring this idea within the realm of the practical was the late Professor James Meade who combined a commitment to the market economy with a passionate concern over the distribution of income and wealth. He wished to extend to all the ability for a time "to snap their fingers at those on whom he must rely for income" now enjoyed by people with property.

Gordon Brown, the chancellor, has gone some way towards such ideas by expanding, and liberalising, as well as renaming, a benefit started under the Conservatives and now called the Working Families Tax Credit, which tops up pay for families with low-paid breadwinners. It could, and may well be, extended to childless couples and even single people.

Even then it would stop short of being a basic income because of the work condition. It might more accurately be called a minimum income for those willing to work (not to be confused with the minimum wage).

There is something in the criticism of David Willetts, the shadow social security secretary, that the chancellor is creating a system of quite ludicrous complexity which probably only 20 people in the country fully understand.* But the way out of this morass is not to roll back cash grants but to make them simpler and less conditional - in other words, to make them more like a true basic income.

Two left-of-centre think-tanks, the Institute for Public Policy Research and the Fabian Society, now urge a further step forward. Both favour some form of capital endowment for all. The IPPR paper has more supporting statistics and considers a greater variety of schemes.** But it is written in the barbaric jargon which New Labour has inherited from the student agitator Dave Spart in the UK magazine Private Eye.

The Fabian pamphlet, whose senior author is Julian Le Grand, is on the other hand written in a civilised way; and it does at least try to attract those Conservatives who really do believe in a property-owning democracy but realise that their party did not achieve it***. The Le Grand paper has also the advantage of outlining one clear-cut scheme, which ought to be promoted by independent opinion.

In outline, the Fabian plan is that everyone should receive a one-off grant of £10,000 on reaching 18. The £6.5bn needed annually would be found by transforming the existing estate duty into an inheritance duty levied on beneficiaries and making it effective. At present, the yield from the tax is less than 1 per cent of total marketable personal wealth - justly decribed as "pitiable". The authors do not want to increase the rate above the present 40 per cent - they talk about an effective average rate of 25 per cent. But they do want to close the loopholes such as gifts inter vivos and discretionary trusts which make estate duty a near-voluntary levy.

A duty at this rate would hardly deter wealth creation; and legatees could hardly object to making some contribution to a more even spread of capital assets.

The main weakness of the Fabian paper is that the authors give little legal or administrative detail on how to make the inheritance tax effective. The 1974-79 Labour government tried in vain to impose a tax on lifetime gifts to prevent avoidance.

The main justification given by both sets of authors for universal capital grants is that existing cash benefits simply top up the income of the poor, while they hope that a capital endowment for all will be used for "preventive" purposes such as education, training, starting in business or buying a home. My own hope is that although it may have to start off in this way, its purposes can be gradually enlarged, initially by introducing projects such as Voluntary Service Overseas or voluntary work at home and eventually becoming the kind of unconditional capital endowment which the older upper and upper-middle classes counted on receiving as a head-start at some point in their lives. What I fear, however, is that the chancellor might be side-tracked by the Clinton scheme for Universal Savings Accounts which are basically about subsidised pensions, intended mainly to embarrass Republican tax-cutters and would not be a substitute for more general capital distribution.

*Browned Off, D. Willetts, Politeia
**Ownership for All, G. Kelly and R. Lissauer, £4.95;
***A Capital Idea, D. Nissan and J. Le Grand.