Hey Willetts, leave those kids alone

leave alone 2

The Resolution Foundation have today published a paper which has as its central thesis

A policy shift is needed to mitigate risks and promote asset accumulation for all

It calls on Government to intervene to make society fairer, at least in terms of wealth distribution.

  • From 2030, citizen’s inheritances of £10,000 should be available from the age of 25 to all British nationals or people born in Britain as restricted-use cash grants, at a cost of £7 billion per year.

  • To reflect the experiences of those who entered the labour market during and since the financial crisis, and to minimise cliff edges between recipients and non-recipients, the introduction of citizen’s inheritances should be phased in, starting with 34 and 35 year olds receiving £1,000 in 2020. Each subsequent year, citizen’s inheritance amounts should then rise and be paid to younger groups, until the policy reaches a steady-state in 2030 when it is paid to 25 year olds only from then on.

  • The citizen’s inheritance should have four permitted uses: funding education and training or paying off tuition fee debt; deposits for rental or home purchase; investment in pensions; and start-up costs for new businesses that are also being supported through recognised entrepreneurship schemes.

  • The citizen’s inheritance should be funded principally by the new lifetime receipts tax, with additional revenues from terminating existing matched savings schemes – the Help to Buy and Lifetime ISAs.

“Lord” David Willetts, who is promoting these ideas, is liberal with his knowledge. At Gregg McClymont’ recent book launch he announced that BT were considering “going CDC”. An indignant BT Pension Director, suggested that I corrected this information (BT aren’t). I guess when you’re a Lord – anything goes.

“Lord” David Willetts is also the architect of DB pension transfers. Why not allow the DB system to be dismantled in favour of capital invested by wealth managers?

I was taught back in those days (1987) that my job as a financial adviser was to put the right money in the right hands at the right time. Financial Planning (then) depended on people deferring gratification and saving. Financial Planning has now been dispensed with – in favour of tax mitigation and wealth preservation schemes.

In short, we have moved from an income based system to a capital based system, largely thanks to “Lord” David Willetts. I put these “Lords” in inverted comments because Willetts really does Lord it. His view, which is now, received wisdom, is that by dumping money at strategic points in people’s lives, Government can do the job that I was told to do – right people, right place, right time.

It’s social engineering gone mad. It’s think-tank madness. It’s Lordly largesse with a big fat lollipop hanging out of the side of its mouth.

Fostering insecurity

It is true that there is less financial confidence among the young than the old. It is also true that the young don’t have to think about death so much, nor the impact of bodies falling apart, nor indeed the responsibilities of having money.

If young people had what old people have – wealth – then they can have our insecurities too!

Actually, one of the challenges of being young, is balancing the urges of short term gratification with the need to be prudent.  The progressive view of the Resolution Foundation is that each generation should benefit from more wealth as they profit both from what they make- and what their parents pass down to them.

So – when the Resolution Foundation find that

Beyond the weak earnings and incomes performance of young adults today, the Intergenerational Commission has identified two major trends which barely featured in political debate for much of the 20th century. The first is that risk is being transferred from firms and government to families and individuals, in their jobs, their pensions and the houses they live in.

In short, the baby boomers are suffering the insecurity of ownership.

The second is that assets are growing in importance as a determinant of people’s living standards, and asset ownership is becoming concentrated within older generations – on average only those born before 1960 have benefited from Britain’s wealth boom to the extent that they have been able to improve on the asset accumulationof their predecessors.

Both trends risk weakening the social contract between the generations that the state has a duty to uphold, as well as undermining the notion that individuals have a fair opportunity to acquire wealth by their own efforts during their working lives.

Actually, “generation rent” – which comprises most people under 35 who aren’t getting a leg up from the Bank of Mum and Dad, have both the insecurity of not being wealthy and the freedom of not being tied down by ownership.

The social contract of which the report makes so much, is based on the Thatcherite premise of ownership, which is actually under threat.

Homes and pensions do not need to be owned as equity, they can be rented and paid from landlords and pension funds.

I see a group of young people (my son being typical) who do not aspire to own anything . They have no record collection (they have Spotify), no car (Zipcar and Uber), no house , no savings – no responsibilities. They have fun and lots of it.

An irresponsible world of youth?

Actually, the millennials don’t seem to be bothered about wealth- or that bothered about debt, they seem reasonably confident in their capacity to cut it in a world where they own the technology, they have the health and the energy to make things happen.

Willetts and co reckon they should be given a dollop of wealth to get them back into the capital owning class that they belong to. But do young people want to be the recipients of hand-outs? I see nothing in this report to suggest that the Resolution Foundation know.

The report suggests that young people are like old people; that they want capital in the form of houses, cars and wealth management.

I see no signs of this being the case. Of course there are entrepreneurs who make their first million by the age of 17 but they do not make for a social norm. The millennial norm is doing fine, having fun, not worrying about being rich or getting angry that they’re not as rich as their parents. They are fine.

Leave those kids alone

The Resolution Foundation has a firm belief in what makes a good citizen and they seem determined to force the mould on generation X, Y and Z.

Meanwhile our kids get on with their lives with little or no interest in what our generation want them to be. It seems this is always the case.

Our progressive view that our kids should be brighter, happier and more fulfilled than ever before, seems to be measured on our terms – not on theirs.

Left to their own devices, young people will reinvent youth their way – ever thus – and no doubt when my son is in his fifties and sixties he will be trying to impose his standards on the generations born twenty years hence.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to Hey Willetts, leave those kids alone

  1. John Mather says:

    Henry plainly Lord W has lost the plot. Your comment Finacial Planniing is not correct the basics you describe from your own financial planning days have not changed.

    I think the fundamental change is with the concept of investment. In 1973 when I started in the life insurance and pensions business if an equity. Portfolio changed in a year by more than 25% it was called churning.

    I am appalled by the frequency of “trading” today. Having been aDirector of a Successful Absolute Return Fund I came across attitudes of Mangement that would not stray too far from an index others were no more than card counting gamblers. In many instances the reason for a trade was the trade itself. Robo advice and fintec auto investing welcomed by active managers ROE is what matters

  2. Phil Castle says:

    Don’t agree with you for once Harry.
    I think what Willets and co are saying deserves debate not derision.

  3. Chris Clifton says:

    While the Willets idea needs debate all £10k will do is scratch the surface of their student debt. If there is £7billion kicking around spare in the coffers why not just use it to reintroduce the student grant rather than trying to buy votes.

  4. Helen says:

    So agreed, most of the 25-30 year olds I know aren’t bothered by their student loan debts, they’re annoying but they treat them like a graduate tax and don’t worry about them. They are however wondering how they are going to afford to buy a house or rent one securely enough to settle down and start families. The 17 – 25 group aren’t there yet, they’re still enjoying the high life, travelling and trying not to worry about the future.
    It’s because of this that the £10k per person is the most useless idea ever, all it will do is push up house prices *again*. They need to invest it in replacing the council house stock and sorting out planning so more people can build their own houses. I can’t help but feel that this has been timed to coincide with the news that house prices are starting to fall, almost like our economy relies on an over inflated housing market.

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