Where there’s a will, there may or may not be a way forward

In December 2017, a report entitled “The Million Dollar Be-Question” by Laura Gardiner was published by the Resolution Foundation [Intergenerational Commission]. It is a report worth examining and heeding by both individual citizens and political parties.

Below is the site from which you can download this report which takes less than 25 pages of A4 paper. 10 sides will give you the introduction and “Executive Summary” from which all quotations are taken and paraphrases, questions and comments derived.

http://www.resolutionfoundation.org/publications/the-million-dollar-be-question-inheritances-gifts-and-their-implications-for-generational-living-standards/

Millennials are poorer than their generational predecessors as shown by home ownership and wider wealth accumulation. They are half as likely to own their own home as baby boomers of the equivalent age and all cohorts born after 1955 are poorer than their predecessors at the same age. [p.1]

In other words, succeeding generations, over all, are getting poorer. Besides being disturbing news in itself it raises the question of how long this decline will continue and its management, future direction and individual and societal impacts.

This report provides recommendations, with reasons, for addressing the increasing and increasingly extreme wealth differences in our society. “This means thinking about investment in both public and private infrastructure, levels of national debt, the build-up of human capital through the education system, and the condition of the environment.”

This is a remarkable and clear call for a deep and wide review of our policies, practices and national expectations. It is significant and needs careful consideration. It seems to say that even if all the wealth in the “third generation” were to be distributed evenly, there would not be enough wealth in the “everyday systems” to maintain, let alone raise, the already declined, younger generational living standards.

The GDP is higher than it was post WW2, yet living standards generally, for the younger generations are declining. Why? Who gains? Who loses? Who breaks even?

“The real value of estates passing on death has more than doubled in the past 20 years.” “The total value of inheritances is set to double over the next 20 years”. These quotations indicate that large proportions of individual and national wealth are being spent in ways which are not productive activities which encourage profitable, regularly recurrent functions and profits but which put up the cost of living.

The underlying and severe socio-economic problems faced in and by our society are indicated by the conclusion that those who will get bequest money will get it too late for socio-economic efficiency because they “will inherit too late —to support living standards during the expensive child-rearing stage.”

Even the release of wealth from the “third generation” to younger generations will cause problems for our current society.

“The transfer of parental property wealth to 20-35 year olds would vastly increase absolute wealth differences within this group, making it harder still for individuals to earn their way towards being wealthy, as opposed to getting there on the basis of their parents’ wealth.”

This report outlines many of our Nation’s problems clearly and quickly. It offers some “sketch map” solutions.

It is well worth reading!

* Steve Trevathan is chairperson of Lyme Regis and Marshwood Vale Liberal Democrats.

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14 Comments

  • Lorenzo Cherin 2nd Jan '18 - 1:44pm

    Steve this is a good article and yet bothersome to me.

    Very many is the number of times I have shared my example of how someone can lose a house and credit rating through no fault of one’s own, only to feel as though nobody cares and nothing changes.

    My situation is , like many, indicative of a socially conservative society.

    A socialist one would be no different. Maybe less precarious.

    I advance the proposition that every individual is different, most in their own world.

    I could be running things now and starting things up and reaching to parts that other people and projects don’t. but for a few thousand quid, or a few hundred at first.

    Banks given bailouts are destroying my finances at worst , doing nothing to help at best.

    I am a member of a party and groups in that , who are indifferent at worst , sluggish at best.

  • William Fowler 2nd Jan '18 - 2:01pm

    ” They are half as likely to own their own home as baby boomers of the equivalent age and all cohorts born after 1955 are poorer than their predecessors at the same age.”

    I was born a little after 1955 and don’t know anyone in that group who is poorer than their parents, most are much wealthier both in terms of net assets and lifestyle. Most had no help from rich parents and started with almost nothing but admittedly got “rich” in the Thatcher years. Huge sums have been paid in income tax and NI, somewhat balanced by house price wealth so no real reason to take their wealth off them, at least until they die.

    The internet generation have unprecedented ways to get rich, so someone with a little talent and drive will do even better than in the Thatcher years. They are going to pay a lot less in income tax and NI as well (it took a while before the top rate of tax came down from 60 percent in the Thatcher years) plus tax credits to help them in the early years.

    Yes, the big downside is lack of cheap accommodation combined with tear-watering transport costs (nothing new in that in London, though), the UK does not do low cost, high quality accommodation – never has – unlike many Continental countries, so a vast waste of effort and enterprise getting on the housing ladder. I think the only way to do it is to have a government dedicate ninety percent of its time to it for five years, using govn and council land combined with a money-grab from the benefits pot to fund it.

  • Richard Underhill 2nd Jan '18 - 3:49pm

    There is a tendency to turn all this into cash, whereas the reality may be yet another old sofa.

  • Steve Trevethan 2nd Jan '18 - 4:28pm

    Thanks for the comments!
    I don’t understand all of it yet but it seems to be worth heeding overall!
    The bit about infrastructure investment, debt levels, the education system and the environment seems to be an OK+ start to policy planning.
    Bailing out the banks with no apparent significant consequences damaged “capitalism” seriously, especially in conjunction with “all debts must be paid”. Perhaps they, like housing, need some “effective for all in the transactions” regulation enforced by appropriately informed and relaxed “regulation cops”. Appropriate policy purposes appear to be that the vast majority have decent living and self improvement circumstances and the accounts come second [just].
    How much of the “successes” of “Thatcherism”were made possible by “Atleeism” and “One Nation Conservatism?
    As the “market” has not yet functioned efficiently by itself, perhaps we need to accept that it does not/won’t and openly discuss what we do about it.
    Did the economic approach prior to the current one deliver more for more people?

  • @ William Fowler “Most had no help from rich parents and started with almost nothing but admittedly got “rich” in the Thatcher years.”

    I assume you refer to the South East of England. Believe it or not there is an entirely different world in places like Bradford, Hull, Blackburn, Hartlepool, Sunderland, Barrow in Furness, Ebbw Vale, and parts of Glasgow. Thatcher created a wastewland in those areas.

    Admittedly there are now growing numbers of hotel owners living in the Highlands who cashed in on their property inflation values in the South East and bought ‘a bargain’ north of the Border. Believe it or not, there is a world outside the M25 bubble.

  • Steve,

    “living standards generally, for the younger generations are declining. Why? Who gains? Who loses? Who breaks even?

    See this New Stateman article “How the world’s greatest financial experiment enriched the rich” Western governments have printed trillions of dollars to boost their economies. While the asset-rich have reaped the benefits of QE, millennials and the poor have lost out.https://www.newstatesman.com/politics/economy/2017/10/how-world-s-greatest-financial-experiment-enriched-rich

    It’s a long read to get to the conclusion about the impact of the explosion of money creation and debt across the developed economies – “At the moment, it’s like drinking wine at a party,” he said. “You know you’re going to get a hangover the next day but you keep drinking anyway, trying to put it off.”

  • I disagree with much of that. Poverty today does not match the poverty of the Fifties. There is no comparison.

    Home ownership is not a reliable metric. Foreign investors and mass immigration have driven up house prices in London and the South East by simply increasing demand massively. Property inflation has priced ordinary citizens out of the market. Villages in some other parts of the country have worthless properties because there are no jobs and no demand.

    Disposable income may be falling today. That happens from time to time. I wonder whether expenditure is like for like. Few people owned a telephone, television, central heating or car in the Fifties. These would be regarded as essentials today.

    It is very easy to use arguments such as these to make political points but it is neither helpful or illuminating.

    Succeeding generations are not getting poorer, however much it suits the argument being made. Benefits and tax credits which are much criticised today did not exist at all in the Fifties.

  • I find that such discussions belong to the affluent South East, or more specifically, the London bubble. It is true that the Baby Boomers have more wealth than their parents. It is equally true that the current generation is more healthy and wealthy than their parents.

    As discussed above, home ownership is a major difference, depending on location, but to most families, the value of their home is not relevant. They have to live somewhere and unless they move across the country, the value cannot be realised.

  • It is worth remembering earlier generations had to live through sky high interest rates during both labour and Tory governments and somehow still managed to feed their families. When the slaughter of manufacturing industry took place in the 8Os. A vast swathe of the population lost a way of life they thought was going to last forever.
    This narrative that earlier generations have shafted the younger ones is both divisive and dangerous. The Lib Dems should be a unifying force and bring both old and young together.

  • Andrew McCaig 2nd Jan '18 - 10:46pm

    Peter,
    Of course the value of a home is relevant. Anyone with significant equity and a steady income can borrow money and use it. Perhaps to start a business, to invest in buy to let, or to pass some on to their children to get them on the housing ladder (which is what I did). This is why the children of homeowners have a huge advantage over the children of tenants.

  • This report is mainly about property and not income. However it does touch on the fact that baby-boomers have or will have better pensions than millennials. While I can see no solutions to the pension problem, we can do something about income inequalities (hopefully LDV will publish my article on this) and assist more millennials own their own home by building enough homes to reduce real-term house prices.

  • Peter Hirst 3rd Jan '18 - 11:36am

    There is no easy solution to this challenge. Much of this wealth is tied up in owning homes. So at least part of the solution is connected with rectifying our housing availability, affordability and tenure. If it were easier and more tax advantageous to bequest before death this might help. This could be linked to insurance in some way, so coping with some of the reasons older generations are reluctant to part with their wealth.

  • Andrew, You are right, a property of high value is a great benefit, particularly if it is inherited.

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