While we wait with nail-biting anxiety for the voters of Makerfield to decide the fate of the country, the prospect of renewal at the top provides a fertile time for breeding ideas and confronting great problems. Alan Milburn’s searing analysis of the first generation ever to do worse financially than their parents did at their age opens the door to people with solutions to this crisis. Now is the time to bring them out.
Among the thinktanks, voluntary sector and business organisations coming forward with ideas, this week the Social Market Foundation (SMF) is offering an inventive plan to help ease the growing inequality between those young people gifted some wealth and the majority who have none. We are now in the time of the “great wealth transfer”, with an estimated £5.5tn to be passed down by the baby boomer generation in the UK over the next three decades. My lucky generation had everything for free. Ordinary salaries bought homes easily and property values rocketed to make homeowners wealthy beyond all expectations, even as the UK has gotten relatively poorer compared to other European and North American countries.
But only a third of adults in the UK expect to receive any intergenerational gifts over their lifetime, according to the Resolution Foundation. In Britain, the bank of mum and dad handed over almost £10bn in 2024, and those with financial support from their families accounted for half of first-time buyers. But 70% of those under-40s who don’t currently own a property think they never will. This SMF report warns that “the sense of injustice around wealth inequality may only therefore increase without government action”. Here’s their idea: a citizens advance.
Under-40s could opt to take a lump sum now in exchange for postponing by a year the date they take their state pension. A year’s worth would be £12,500, available to those who had paid 10 years of national insurance. That would help those people who go straight to work and not to university, so someone taking a job or apprenticeship at 18 could draw it out at the age of 28. Graduates would have to wait until they were 31. It’s not a giveaway, but contributory. A couple in which each person took their advance could pay a 10% deposit on an average home. Surveys find the idea popular with all age groups, and with both Labour and Tory voters. What would they spend it on? Repaying debts came first, saving for a rainy day second (a quarter of people couldn’t pay £850 for an unexpected bill) and saving for a housing deposit third. It should be restricted to those earning below £50,000 a year.
Incomes would jump up as high-interest loans were paid off, while it would help some people start families and found businesses, the report suggests. If the scheme was rolled out this year to those born from 1998 onwards, it would cost £1.3bn in its first 12 months. The perversity of Treasury rules means it would count as current spending, though it would pay back in a few decades with pensions postponed.
Don’t underestimate the paralysing effect of starting out with nothing at all. That’s what Labour knew when it launched the child trust fund (CTF) for every baby born from September 2002, welcoming them with a gift of £250 (£500 for the poorest), repeated at age seven, with families encouraged to add extra. (Labour planned to add more.) It fell under the axe of George Osborne’s first budget, so the last lucky babies were those born in January 2011.
The average fund is only worth about £2,240, but research by the London School of Economics’ Abigail McKnight showed even small sums make a difference, improving wages, employment prospects and general health. Even a small cushion allows young people not to have to take the first job they’re offered, to switch jobs, to train, to buy a car to reach work further away or to pay a deposit to rent a flat. (The demise of the CTF means many families forgot it was there: the hundreds of thousands of people still owed it can find their missing nest egg here.) The citizens advance would give people a bigger sum, but one they would claim when they were a little older.
It’s a good idea, but this is young people borrowing from their future selves, not older people contributing towards them what they should. Much more action is needed to confront the great generation wealth gap and the growing divide between young people with family backing and those with none. The parents who can afford it are not to blame for bankrolling their children: how can they sit in their own valuable homes watching them pay unaffordable rent to landlords? No wonder some reach for equity release to contribute. But millions of older people rattle around in large homes sitting on huge wealth when they should downsize, releasing properties for families.
Here’s the size of the colossal generation gap in wealth: in the UK, the over-60s own 56% of housing wealth, while the under-40s have as little as 4% of overall wealth. It’s not enough for better-off families to look after their own: only state intervention can begin to tilt funds towards the two-thirds of UK adults with no family gifts. Plans are brewing in the thinktank zone, while Milburn’s team says businesses are responding: Marks & Spencer just announced it will take on an extra 1,000 under-24s in the UK and Ireland who have never had a job.
The last time it was in power, Labour’s New Deal for young unemployed people succeeded because it was right at the beating heart of No 10, shaking up jobcentres and employers, boosting young people’s self-confidence. It was one of the measures every progressive on every point of the spectrum could be proud of. But we live in highly divisive times. It seems impossible to look at the relevant data and not conclude that one generation has failed in its duty to another and should, however belatedly, seek to make amends. But this issue, like virtually all of the fundamental societal issues that governments have sought to address in this century and the latter stages of the last, risks being swamped by partisan politics. Telling well-off older people that they have a duty to support more redistribution towards the young, reminding them that they have been lucky rather than clever or particularly “hard-working” in gaining their property wealth may seem sensible and necessary. But that won’t stop the right, politicians and media outriders, casting every redistributive act as ideologically driven leftwing thievery. Let the ideas flow, pursue the cleverest – but also be ready for the battles ahead.
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Polly Toynbee is a Guardian columnist