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A citizens’ fund may support mis-spent youth

Terry smiling headThere is growing pressure from Britain’s think tanks for we citizens to benefit from a one-off state hand-out. The assumption seems to be that most of the adult population is in need of a cash bonus to tide us over.

The Institute for Public Policy Research (IPPR) has come up with a report calling on the government to sell assets, including its stake in Royal Bank of Scotland, and give £10,000 to everyone in the country when they turn 25.

A couple of months ago the Royal Society of Arts was also suggesting a big state giveaway, only this time to all those under 55. Coincidentally, this would also be £10,000, a figure arrived at without much explanation, but seemingly the ‘going rate’.

The IPPR wants to create a “Citizens’ Wealth Fund” worth £186 billion by 2029/30, large enough to give every young adult in the UK a lasting stake in the economy via a one-off capital dividend.

The RSA, on the the other hand, is focused on everyone getting a basic state wage to help steer citizens through the transition in jobs expected in the 2020s, namely automation.

Do any of these ideas have merit?

The numbers do look somewhat arbitrary and are hardly life-changing. Receiving the money at 25 is too late to pay for student fees, though it may may pay off (or help to pay off) student debt.

It could be used as a down payment on a property, though the likelihood is that a flood of this money into the property market would only inflate prices further.

A £10,000 nest egg for everyone under 55 would prompt similar responses that greeted the pension freedoms for those over 55 who are now allowed to access their pension pots. Many were expected to blow the money on fast cars and other unnecessary luxuries. Instead, they used the 25% tax free lump sum to start a business, or pay off their mortgage.

For younger people, who traditionally defer their needs in later life, there is a real danger that far from buying a “stake in the economy” they would do exactly what was expected of their elders and simply blow the cash on a long round-the-world holiday and frivolous items that they don’t really need.

Those accessing their pensions know they are diluting the size of their retirement pot, so are more likely to take greater care over how much they withdraw. By contrast, these proposed cash handouts would be free, unearned money with none of these responsibilities attached.

For these reasons, should either of these options be adopted, some limitations would need to be imposed on how the cash could be spent.

Some may argue that it would be preferable to see the proceeds of any sale of state assets re-invested in the economy and welfare measures in a more controlled and equitable manner.

After all, there is a long history of lottery winners and gamblers blowing their fortunes and £186bn is an awful lot of money to hand over to those who may not spend it wisely.


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