Is a £10,000 Citizens Inheritance for millennials a good idea?

The job of a think tank is to spark debate and the Resolution Foundation's Intergenerational Commission has certainly done that with its call for millennials to be offered a £10,000 “Citizen’s Inheritance” when they reach age 25 to spend on education, starting a business, a deposit on a home.

The idea is motivated by the break down in the “contract between the generations”. Young people face challenges their grandparents never encountered. Jobs are insecure and short term. Houses have never been less affordable. Getting an education means going deep into debt. Typical incomes at age thirty are, in real terms, a third lower than those enjoyed by their baby boomer grandparents. Then they have to put up with snarky columnists and radio phone in show callers wagging their fingers and telling them they’d have their deposits in no time if they’d just give up their avocado toast and lattes.

And they say it’s young people that are self righteous and snotty.

The problem with the 10k payout is that while it has kicked off a discussion, and comes with the side benefit that it will seriously annoy some of those self righteous baby boomers, it’s ultimately a gimmicky idea that doesn’t stand up to close analysis, while risking detracting from some good ones the Commission has put forward.

While the baby boomers have done extremely well has a group, there is still considerable poverty within it.

Is it justifiable to pay Tarquin and Sophia ten grand each to top up the bung from their parents to help them buy a Kensington flat when retirees Bob and Sue can only afford to heat one room in their Sunderland council terrace, even if the £10k is ultimately to be paid for through a higher tax on the wads of cash the posh kids will at some point inherit?

This is basically the point of the right wing Institution for Economic Affairs, and it pains me to find myself agreeing with it against the Commission, even it if is on that one point alone.

Its other ideas range from good to very good. They are really what we should be talking about.

It is a hard fact that we are going to have to pay more tax to fund things such as social care and the NHS as the baby boomers age and those of us in generation X follow them.

That is going to get very expensive, and politicians haven't even begun to have a proper conversation with the electorate about it. They’d much rather kick the can down the road.

A number of organisations have done, however, proposing to address the issue by taxing the vast store of wealth that has built up in Britain.

The Commission wants to do that by scrapping Inheritance Tax (IHT) and replacing it with something new. IHT is commonly perceived (wrongly) as unfair through being a tax on the dead. Its proposed replacement, a new Lifetime Receipts Tax, imposes a charge on the recipient of any intergenerational gift, whether from the living or the dead, at any time.

You would get £125,000 tax free, which is a decent sum, after which a 20p rate would be applied on amounts of up to £500,000 with 30p on amounts above that.

Tarquin and Sophia would be able to use their allowance to tap the bank of mum and dad for their deposit, and at an earlier age than when most people inherit (61). They wouldn't need the 10k.

It is true that others could make more worthwhile use of it, but so could the NHS, and so could the cash strapped further education sector, would be better off being funded directly.

Coupled with a more progressive property tax that takes account of actual values (something the current council tax does not) and you end up taxing wealth more effectively while standing a chance of plugging a nasty fiscal hole that threatens to open up before Britain.

A better way to help millennials get on the property ladder is to increase the supply of property, while reforming the rules on renting to make it more secure. More rights at work from a government that cared about such things (so not the incumbent) would help alleviate the problems caused by the gig economy so many of them are in hock to.

The Foundation and its Commission are mostly the right track about these sorts of issues. The IEA, less so.

So that's a relief.