Will gifting £10,000 really make life easier for millennials?

Left Foot Forward

A new report is proposing giving people in their 20s a 'Citizen's Inheritance' and controlled rents. Joana Ramiro investigates.

The proposals in the new Intergenerational Commission report (published by the Resolution Foundation) will not sound particularly shocking to young people struggling to make ends meet in Britain’s hostile job and housing market. But will they really bridge the generational wealth gap between Millennials and Baby Boomers?

Wealth Equality

The Commission’s last – but undoubtedly ballsiest – recommendation is that all young British citizens are awarded a £10,000 “citizen’s inheritance” or stipend, to level out the playing field between wealthy Baby Boomers and struggling Millennials.

According to the report, the allowance would not only help with home-buying and retraining (in fee-charging higher education), but also “add an estimated £45,000to retirement savings pots if immediately invested in a pension.”

The measure is not new, and is in fact very similar to the one proposed by the Institute for Public Policy Research (IPPR) just a month ago.


Where the two think-tanks diverge is on inheritance tax, which the Resolution Foundation is proposing to scrap altogether in favour of a “lifetime recipes tax”. With Britain being the home of some very wealthy families, the IPPR’s proposal to reform the tax to include “gifts” and other forms of wealth transferral could possibly be more efficient.

Housing

Most of the Commission’s proposals are based on measures that would make renting and home buying simpler, safer and more accessible for those born after 1985.

‘Indeterminate tenancies’, also known as indefinite or permanent, would remove much of the instability of renting in competitive housing environments, such as London. Currently most tenancies are based on six to 12-month contracts that either roll on or are duly renewed (often with rent-increases), depending on the landlord’s wishes.

The Commission also proposes “light-touch rent stabilisation”, which is to say that rents should be pretty much frozen on a three year basis. Rent control too would help young people, many of whom are on low and often non-increasing salaries.

None of these policies is new. Housing campaigners have been calling for rent controls and stable tenancies for years. Having David Willetts (a one-time high-profile member of David Cameron’s cabinet, turned Conservative peer and chair of the Intergenerational Commission) add his voice to the demands might help move some Westminster pawns, but will it really bring change?

As far as home-ownership is concerned, the Commission proposals come in line with recent Conservative government policies to make buying slightly more accessible to young people. There’s a demand for halving stamp duty, and tax cuts to multiple-home owners selling to first time buyers. It also pushes for a more radical replacement of council tax with a “progressive property tax”, where second and empty-home owners would pay a surcharge on their properties.

More worrying, however, is the proposal to pilot community land auctions, something that would see more private property developers bidding for public land. Current affordable housing quotas (minimum 30% of all newly built homes) are not only arguably too low to meet demand, but also based on existing market prices. In other words, the discounts applied on extraordinarily expensive house prices still leave most Millennials out of pocket.

Reuben Young, director of housing campaign PricedOut, told Left Foot Forward:

“Millennials have been dispossessed, largely by previous generations’ failure to build enough housing. The remedies proposed by the Resolution Foundation – in particular the reform of our outdated and unfair property tax system – would go some way towards redressing this balance. But this must be done in conjunction with building many more homes in high demand areas.

“Giving millennials £10,000 to spend on a deposit will be inflationary if no additional homes are built. Fewer restrictions on the grant would make it less inflationary and give more flexibility to young people.”

The report does, however, recommend a reform and expansion of housing benefit rules. It also encourages the government to “reduce the age at which young people can only claim the shared accommodation rate from under 35 to under 30.”

Employment

Like others before them, the Commission has come out against zero-hours contracts and extended statutory rights for the self-employed. Indeed, there’s an unprecedented focus on the self-employed, with a proposal that employers hiring freelance workers contribute towards their pensions, and a lowering of the earnings threshold for tax enrolment.

These measures are naturally welcomes, but little is said about low-incomes other than a call for “flattening the rate of pensions tax relief and exempting employee pension contributions from National Insurance.”

But to most Millennials the problem lies between consistently low incomes and ever increasing living costs. Proposals on wage increases and making a living wage compulsory for workers of all ages are not included. Nor is there anything said about a possible unconditional basic income alternative.

Social Care & NHS

The Commission’s proposals on social care and NHS funding come in a mixed bag.

There’s a demand for a £2 billion investment in public social care taken directly from reformed property taxation. Indeed, there’s a proposal for increased property-based contributions (as long as “no-one pays more than a quarter of their wealth towards their own care”). It also suggests the introduction of a £2.3 billion “NHS levy” on pensioners and workers above State Pension age, via National Insurance.

The report tries to address low-income pensioners’ worries by guaranteeing that “four-fifths of revenues are drawn from the richest fifth of pensioners.”

But if Twitter commentary is to be believed, the recommendations were not welcomed with open arms by the Baby Boomer generation.

Joana Ramiro is a reporter for Left Foot Forward. You can follow her on Twitter for all sorts of rants here.

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