£10,000 for every 25-year-old

Source: Helena Lopes en Unsplash

Give millennials £10,000 each to tackle generation gap, says think tank

Resolution Foundation proposes ‘citizen’s inheritance’ to help redistribute wealth to young

Every person in Britain should receive £10,000 when they turn 25 to help fix the “broken” inter-generational contract between millennials and baby boomers, an influential think tank has proposed following a two-year study.

The payment, described as a “citizen’s inheritance”, is intended to redistribute wealth at a time when young people need it most to find housing, return to education or start a business.

It is also intended to reduce resentment towards baby boomers (born 1946-65) who have typically done better out of the housing market and pensions than any subsequent generation.

The idea has emerged from the Resolution Foundation’s inter-generational commission, which has been working on the issue for two years and has now published its final report.

The panel was chaired by David Willetts, the former Conservative universities minister, and included the TUC secretary general, Frances O’Grady, and the CBI director general, Carolyn Fairbairn. 

Fairbairn, who represents British business, said the tacit deal in which the young look after the old and the old help the young have a better life than the generation before had broken down.

“Younger generations are bearing more risks and holding fewer assets than their predecessors,” the report states. “We need to redress that imbalance if we are to maintain the promise of an asset-owning democracy.”

The findings will be seized on by millennials (born 1981-2000) who believe they have been miscast as spendthrift hedonists who would rather splash out on artisan coffee and slices of avocado on toast than save for a house deposit. Research found that in 2001 people aged 25-34 consumed the same as 55-64 year olds, and today they consume 15% less.

The £10,000 lump sum would be funded by a change to inheritance tax, the authors said. Inheritance is taxed at 40% above a threshold of £1m for many. It is proposed that this would be replaced with a new 20% tax on all gifts or inheritances throughout one’s life up to £500,000, and then at 30% above that.

Some millennials said the handout would barely affect their finances, given the extent of student debt and the cost of housing. Others said it could be money down the drain if it was not used wisely. 

However, the commission said it could only be used for housing, education, starting a business or towards a pension.

The idea is underpinned by analysis that shows inherited wealth will have an ever greater effect on standards of living, with inheritances and gifts from parents set to grow in size much faster than incomes.

“This poses challenges,” the authors write. “Many will not inherit, and those that do are likely to receive this support shortly before retirement rather than in the expensive family-raising years.”

That not only creates a widening gap between the asset wealth of the generations but will also sow division among millennials. “Inequalities of income within generations are higher for younger people today than for their predecessors,” the report says. “There is a risk that the growing importance of inheritances means intergenerational gaps combine with intragenerational inequalities to hold back social mobility.”

Painting a largely grim picture for millennials, the commission found that the disposable income of 30-year olds today was no higher than that of the generation before them, despite the economy growing 14% in the last 15 years. Millennials are half as likely as baby boomers to own their own home by the age of 30 and four times more likely to rent in the private sector.

The number of families bringing up children in rented homes has trebled since 2003, to 1.8 million. Millennials in their 20s are more likely to be in insecure work than their Generation X predecessors (born 1966-80). Introducing indeterminate tenancies and limiting rent increases to inflation for three-year periods are among the proposals to help.

However, millennials benefit from higher overall employment rates, higher employment rates for women and a falling gender pay gap.

“Britain’s contract between generations lies at the heart of society,” said Willetts. “As families we provide for our children and parents at different times. We expect the state to support these natural instincts, but too often it is tilted in the opposite direction. Many people no longer believe that Britain is delivering on its obligations to young and old.”

The report tackles the rising cost of health and social care. It proposes an extra £2.3bn per year for the NHS to help address an estimated unmet care need felt by 1.2 million people aged over 65.

This would be funded partly by a new property tax to replace council tax, of up to 0.85% on properties worth more than the cheapest 10% and a 1.7% marginal rate above £600,000. Working people over 65 would also have to pay a new NHS levy.

Millennials on the ‘citizen’s inheritance’ plan

“I would have a big smile on my face. With no restrictions it would be gone in a month, but with the restrictions, how would it help me? £10,000 is not even enough for a deposit and I don’t want to deal with my pension until I am in my late 30s. I won’t think that far ahead. But if there were no restrictions I would be straight down to Selfridges.” Nikeh Gray, 29, London

“Having that amount of money at 25 would change your ability to afford a house. Maybe you could put it into a bond while you get the rest of the money together. What the older generation don’t understand is that while the minimum wage helped people afford things for a while, that’s not the case now. I gave up on buying a house a few years ago because I realised I would never afford it.” Matilda Morgan, 23, Petersfield

“I would put it towards furthering my music education, but it won’t make much of a difference; it would cover me for about two terms. There are lots of other problems with this millennial cohort. A lot of them feel the world owes them something because they were promised they can do anything they want when they were kids. My fear is some people might get the £10,000, decide to be an entrepreneur and waste it. I am kind of embarrassed to be part of that millennial group.” Rory Childs, 21, London

Source: Guardian