The Resolution Foundation think tank is provoking discussions of millennial entitlement after a proposal that 25-year-olds should receive a £10,000 “Citizen’s Inheritance” to reduce the wealth disparity between generations. Older people love to write articles about how millennials wouldn’t be so poor if they stopped spending money on avocado toast or coffee. Meanwhile, they ignore the very real breakdown of economic growth. Older generations promised to create better lives for their children, but this clearly did not happen. Britain is one of the most pessimistic societies about the future prospects for its young people. Millennials face struggles that their parents and grandparents never did. The baby boomer generation typically earned a third more than 30-year-olds are earning today. Student loan debt is soaring, the job market is insecure, and getting onto the homeowner ladder is an impossibility. Would a £10,000 handout actually make a difference?
What is a Citizen’s Inheritance?
The Resolution Foundation has proposed a Citizens Inheritance of £10,000. Young people would receive this payment from the government on their 25th birthday. There would be restrictions on how recipients could spend this money, however. It is intended for investment towards property, education, business, or a pension. It would give young people a boost to help them have a fairer start in working life. The government could fund these payouts by changing Inheritance Tax. The money would come from replacing it with a Lifetime Receipts Tax, which would impose a tax-free limit of £125,000 on inheritance. Some other proposals which would benefit millennials include replacing the Council Tax system with a property tax for wealthy homeowners. The money from this tax would go towards reducing Stamp Duty for first-time buyers and increasing public social care funding. Tax on earnings above state pension age could contribute to funding NHS services.
How Would the Citizen’s Inheritance Help?
In theory, the £10,000 would assist young people and give them a head start in life. Realistically, though, this amount of money is not likely to go very far. When it comes to paying for the deposit on a home, it will cover half of the deposit at best. This is only in the north of England, as deposits elsewhere can rise by up to 11 times the Citizen’s Inheritance. Surely it could help entrepreneurs to start up their business? Maybe, but on average start-up costs run closer to £20,000 in the first year. Around 328,000 start-ups fold every year, with only half of new businesses likely to survive more than five years. What about education? With student loans available, most people will not need to pay tuition fees upfront. With the total cost of student loan debt averaging at £50,000-£60,000 per student, there’s no point in only paying off a fraction of it. Even one-off professional training courses can cost thousands. At least stashing it in a pension fund would accrue interest.
Would a Citizen’s Inheritance Actually Work?
Aside from the problems above, there are plenty of further issues which a Citizen’s Inheritance would not address. As Iman Amrani pointed out for The Guardian, there are structural problems which a small financial handout won’t fix. There is no longer the guarantee of a job for graduates following the traditional route of higher education. From zero hour contracts to the gig economy, young people are struggling to find well-paid jobs to utilize their skills. Living and housing costs are so high that most young people are resigning themselves to a lifetime of renting. It would be better for the government to properly address working conditions and tenant protection in the long-term. Inter-generational unfairness and housing costs could be offset by reducing income tax rather than providing a cash handout. If Citizen’s Inheritance wasn’t means-tested, it wouldn’t do much for fairness anyway. We will have to wait and see if anything comes of this proposition.