Saturday, 12 May 2018

Citizen's Inheritance: actully a good idea.

The Resolution foundation's proposal for a grant of £1 000 to every UK citizen when he or she reaches the age of 25 has received something of a panning on the Guardian's letters page but I think it is a good idea
 I first came across it during a "refresher week" for teachers of economics at Bath University in the late 1960s.  There a Professor Cedric Sandford argued for what he called a "state dowry" of £500 for all children when they reached  the age of 18.
 Although using the "dowry" for the  deposit for a house was mentioned  this wasn't them seen as crucial.  Back then houses were still affordable, even for those who married in their twenties,  and it was perfectly respectable for even professionals to live in council houses, which hadn’t yet been flogged off.  Council house tenancies were secure in those days, and could even be inherited, I think.
Sanford's main aim was to ease what he saw as one of the greatest  causes of inequality,  lack of capital for the majority of the population. 
The "dowry" could be used to finance further education, an apprenticeship,  set up a business, yes, pay the deposit a house, but also enable a “gap-year "style tour of the world, or whatever else took the youngster's fancy.  Sandford suggested no restrictions.  His point was, as far as I can remember, that the children of the comfortable off had these choices, the vast majority didn't, and the "dowry" would equalise opportunities

The Resolution Foundation's proposal is meaner (Sandford's £500 would be worth more like £20 000 today rather than the RF's £10 000), received later, (at 25 rather than 18) and hedged around with restrictions (to be used only for education, starting a business, housing, or towards a pension).  

How sadly both our generosity and our trust in the young has deteriorated over the years.
Nevertheless the RF's proposal has brought this hitherto obscure measure into the mainstream of thought.  Let's hope that not another half-century passes before it is put into practice.

As it happens, I've had the opportunity to put the "dowry" concept into practice for my only two young relatives, a great nephew and great niece The girl was born into the Child Trust Fund  era, which Labour set up to encourage tax-free savings for children and their parents with a "starter" of £250, and which Tory George Osborne abolished for new entrants in 2010 (they really aren't keen on equality). The boy  was too old for a Child Trust Find so I set up a Junior ISA for him, and I've contributed to these so that both will have a nice little nest-egg when they reach 18. 

 Given that the Daily Telegraph tells us that it costs over £200 000 to bring up a child in the UK (which seems a lot: maybe it incudes private school fees for well-heeled Telegraph readers)  my contributions have been minuscule compared with those of their parents, so I neither expect nor deserve any plaudits.  There are no restrictions on the way thy spend their nest-egg so it will be interesting to see whether they use it wisely, as Sandford predicted most would, or fritter it away on clothes, driving lessons and cars.

I agree with the RF proposal that part of the cost of their scheme should be funded by requiring pensioners who do paid work beyond retirement age to pay National Insurance Contributions: indeed I'd go further and remove the "cap" for all ages so that those on enormous salaries pay the same percentage as those on  average earnings.  Similarly I agree with their proposal that Personal Care, if required, should be paid for and again would remove the cap of "up to a quarter of property wealth."

Finally, another good idea very similar to one which the Liberal Party proposed in the 1960s: that inheritance tax should be levied not on the bequeather's estate  but on the recipients, and on a sliding scale, so that those who received small bequests would pay little or no tax, and large bequests would be hit harder.  The RF proposes that this should apply to all "lifetime gifts"

Sadly our political classes are so pre-occupied with Brexit that I suspect  these, and other constructive ideas to tackle our real problems, will be placed on the back-burner and quietly  forgotten.   


  1. They could use the £1000 to pay off 3-4% of their tuition fee debt.

  2. That's probably not the wisest thing to do. See next post (when I've written it.)