In 1999 Tony Blair gave a speech in which he contrasted the experience of two babies on a maternity ward. Delivered by the same doctors, in the same ward, they nonetheless had different lives ahead of them. One would return to a cramped home and a workless mother who would struggle to give her child a good start in life. The other returned to a prosperous home, loving family and high expectations for the future.

At its heart this story illustrated the vital importance of the early years of a child's life. Research has shown that a mother or father being interested in their children's education could increase a child's chances of moving out of poverty as an adult by 25 percentage points. And a child's development score at just 22 months can serve as an accurate predictor of educational outcomes at 26 years. But, shamefully, this is a story that has hardly changed in the last decade. Two babies born on the same maternity ward in 2011 are still at risk of the same great divergence as they were back in 1999, despite everything we know about the importance of early intervention in making a difference to a child's life. This shows that there is so much more that has to be done.

I hope that we will look back on Graham Allen's reports as the moment we took this issue from the specialist and into society at large. Graham Allen and I came together in 2008 – two politicians from different parties – so we could write a book to establish some of the key evidence for getting in there early to give children a solid foundation for later life. I have witnessed first hand his passion and commitment to this cause.

So last year I asked Allen to write two reports that would get these issues high up on the public agenda. The first established the evidence base and best practice around early intervention, outlining the benefits to society from investing early. The second report, crucially, is about how to make this happen. How do we get money for these interventions so we can make them a reality, particularly when we are facing one of the tightest fiscal environments in living memory?

The answer lies in social investment: unlocking private finance in the pursuit of the social good. This means encouraging private investors to back projects with disadvantaged children and young people by rewarding them with some of the savings to the public purse further down the line – but only if their investments work. When you consider that it costs around £59,000 a year on average for a youth to be placed in a young offender's institute, or hundreds of thousands of pounds to support an individual for a lifetime on benefits, it should be clear that the savings are potentially huge.

However, this is also a powerful message about social justice, getting investors to do something positive for their community while seeing a return on their investment at the same time. This is how we can start re-engaging the top of society with those at the bottom, reviving that sense of shared community that has been missing for too long.

Allen has worked with banks, social enterprises and others on this model, establishing recommendations for how government could build the social investment market. Sir Ronald Cohen, known to many as the father of social investment, is clear about the possibilities here, saying that "social enterprise and impact investing, in short, look like the wave of the future". Indeed, in his view, "impact [social investment] capital is the new venture capital". I can think of few things in government more exciting and challenging.

And the government has an important role to play, both at the central and local level. Despite fiscal constraints we are committed to funding an early intervention grant for local authorities worth more than £2bn a year. Councils need to recognise the huge potential of this, and I hope the publication of Allen's report will hammer home the message that early intervention offers the best hope for today's children. It could turn out to be the smartest decision local and national government ever made.