Introduction

The social investment perspective has been influential for a least a decade. It frames social policy expenditures as investments rather than expenditures, forecasting future dividends from spending now, and describes social policy as supporting larger objectives – namely, propelling economies into the 21st century, and positioning states as innovative and competitive players in the global marketplace. The claim is that good economic outcomes depend on good social policy. A core concern is creating incentives for most adults to enter the labour market. Income supplements, particularly those that ‘make work pay’, are both popular and described as ‘investments’ because not only are they less costly than social assistance payments, they also foster a culture of inclusion and break the cycle of poverty. At the same time, however, the social investment perspective makes individuals responsible for ‘investing in themselves’ and their children. There are significant incentives to families to accumulate assets.

Here we trace the embrace and adaptation of the social investment perspective in Britain, from the early 1990s through to the likely election of a third government led by Tony Blair. We ask about the ‘domestication’ of the perspective and the particular policies and programmes that have been adopted, focusing on four particularly important policy goals: reducing child poverty; reforming learning; increasing quality childcare services; and promoting the accumulation of assets. In these four policy domains, our analysis seeks to uncover the reasons for the choices made, by attributing weight not only to institutional factors but also to the interests, ideas and identities of the actors involved.

The social investment perspective in general

In the mid-1990s, straightforward neo-liberalism, represented by Thatcherism and Reaganism had hit both an ideational and a political wall; the promised cutbacks in state activity and massive savings in state expenditures failed to materialise and social problems deepened. Poverty rates steadily mounted, and fears about social cohesion haunted policy makers, including the most economistic, who had rarely given it much previous attention. In international organisations as well as on the centreleft, old analyses were giving way to new ideas. In his influential formulation, Anthony Giddens wrote (1998, p 117): “In place of the welfare state we should put the social investment state, operating in the context of a positive welfare society”.