What does society owe to young adults? In this blog, Dr Stuart White makes the case for a designing a citizen's inheritance fund to help launch them into adult life.
What does society owe to young adults? We have very definite expectations that society does owe people certain things at other stages of their life. Older people ought to get pensions. Children have a right to an education. It is not clear we have similar expectations for people in their early adult years (say, 18-25). In her excellent recent book, Justice Across Ages: Treating Young and Old as Equals, the philosopher Juliana Uhuru Bidadanure argues that this points to an injustice, a failure to show equal respect for individuals at different ages. To address this injustice, Bidadanure argues for political representation rights for young people, such as youth quotas in parliament, and for specific social rights, including a right to a capital grant in early adulthood.
Bidadanure’s argument connects with the argument of Thomas Paine in his 1797 essay, Agrarian Justice. Paine argues that all people reaching adulthood should receive a capital grant to help them ‘begin the world’. This is such an evocative phrase, suggesting that we ought to be able to launch into adult life with creativity and ambition. ‘Ambition’ does not have to mean occupational or commercial ambition; it can be a matter of stepping out of the mainstream and trying something unconventional.
How well is the UK doing in meeting this interest in ‘beginning the world’? Back in 2010 the Coalition government took two steps that must frame our discussion.
The first was to abolish the Child Trust Fund (CTF). This was a programme, introduced by Labour, under which every child in the UK received a sum at birth which was then invested in a special account. The initial sums were £250 for most children, £500 for those in poorer households. Families could make further payments into this account (up to a modest annual ceiling). But a key feature was that once the money had been placed into the account – the individual’s CTF – it could not be taken out. It stayed there, growing in value, up to the individual’s 18th birthday when it became theirs. All children born between September 2002 and 2nd January 2011 received a CTF payment, which means that those reaching 18 between September 2020 and roughly the end of 2028 will get something from the CTF policy. The UK government’s disregard for this policy legacy is clear, however, from its failure to anticipate a significant problem for those with learning disabilities accessing their matured CTFs.
The second step the Coalition took, which received much more attention, was to treble university tuition fees, from a baseline of £3,000 per year to £9,000. Although at the time, defenders of the reform made much of the supposed generosity of the accompanying loan system, the UK government has recently changed the rules. The period of repayment has been extended (from 30 to 40 years); the earnings threshold at which repayments start has been lowered and frozen until 2026/27; and from 2026/27, this threshold will rise with inflation rather than earnings, meaning that it is likely to fall further in real terms over time. These changes will significantly increase the repayment burden on middle- and low-earners.
The effect of these two measures – abolition of the CTF and the hiking of tuition fees – is to help put the UK firmly on track to a society in which young people do not ‘begin the world’ in Paine’s positive sense but with a burden of debt. The situation is made worse by labour and housing market trends which are making things harder for younger people. A recent report by the Resolution Foundation finds that young adults today are at a significant disadvantage to previous generations in buying a house. Some young people will find their situation helped as they grow older and start to inherit some wealth from their parents or grandparents. But as a study published last year by the Institute for Fiscal Studies shows, those in higher income groups are likely to receive larger inheritances on average. And that possible future inheritance does not necessarily do much to assist creativity and experimentation when young.
One response to this situation is to call for the return to free university education. I agree with this objective. Even if we don’t do this, there is no need to link fees to the wider marketisation of Higher Education (HE). We can decouple fees as a means of financing HE, if we retain them, from using market processes to drive the structure of HE provision.
By itself, however, a policy of free university education has a drawback, as suggested in a recent article by Sonia Sodha. What about those who don’t go to university? Those who get a free university education receive at least two things that are valuable for any young adult: skills and credentials that represent an asset for their future, and also some time to reflect creatively on what they wish to do with their life. (The latter is especially true if students receive not only free tuition but also – as my generation of UK University students did – a stipend to meet living expenses.) Surely, though, all young people, regardless of academic ability or inclination, have a right to start their adult lives with the resources and support to think creatively and ambitiously about what they wish to do with their lives?
This is where a policy like the CTF comes in. The CTF was a very modest effort to establish what we might call a ‘citizen’s inheritance’. Under a genuine scheme of this kind, as originally proposed by Paine, every citizen or resident receives a capital grant in their early adult years which they are free to use to support their entry into adult life. A universal capital grant scheme could be linked to specific purposes, such as education and training and setting up a business, or simply made available as capital the individual can use as they wish.
A universal grant scheme of this kind could be designed so that the grant is high enough to cover University tuition fees. In this way, it would effectively restore free University education. But it would also provide a resource equivalent for those not going to university.
If, however, it is initially too expensive to set a grant at this level, a tough question arises. Should the priority be to restore free University education or to provide a modest capital grant to all, set somewhat below the University tuition fee level? There are arguments on both sides, but there is at least one obvious fairness consideration that favours the capital grant policy: it gives all young people something rather than concentrating resources on those who go to university.
The idea of a citizen’s inheritance had some influence in the UK in the 2000s but fell away in the years of austerity. There are now welcome signs of a renewal of interest in the UK. John McDonnell developed a policy agenda as Labour’s Shadow Chancellor which took wealth inequality seriously, such as through community wealth-building, although without a specific focus on young adults. Closer to the citizens’ inheritance idea is the Social Market Foundation’s recent proposal for a £1,500 savings account for all 15-year-olds.
UK policy discussion can potentially learn from a new wave of proposals emerging elsewhere. The idea of a universal capital grant features prominently in Thomas Piketty’s programme for a new ‘Twenty first century socialism’, as set out in his book Capital and Ideology. Piketty is very ambitious for the idea, proposing a capital grant for all adults at age 25 set at around 120,000 Euros in richer capitalist nations such as the USA, France, and Japan. This would be financed from a combination of a wealth and inheritance taxes, amounting to about 5% of national income per year. A recent workshop, as part of the ‘Real Utopias for Europe’ series organised by the European Commission’s Scientific Hub, explored proposals for more modest versions of the idea in Italy, Germany, and other EU nations. In the United States, Darrick Hamilton has long argued for a ‘baby bond’ akin to the CTF as a means of addressing the racial wealth gap. The idea is now being taken up and explored in a number of US states. It has informed the thinking of a new campaigning think-tank, End Poverty in California (EPIC), headed by former Stockdale mayor, Michael Tubbs.
The Eastern Band of Cherokee provide all young adult members of their community with a sizeable capital grant. This is paid for not from taxation but from the revenue earned on collective assets. This points to another possible route towards universalising inheritance in early adulthood. Many nations have sovereign wealth funds (and the SMF has suggested the UK should explore joining them). Angela Cummine has argued for democratising the way these funds are managed and using the returns on the assets in ways that benefit all citizens. If the UK were to establish a Citizens’ Wealth Fund of this kind, as also argued by Stewart Lansley, it could be used to help fund a universal capital grant scheme (although it would take time for the fund to accumulate).
There is also an overlap between the universal capital grant idea and the proposal for a universal basic income, an income paid to all on an individual basis regardless of means and employment history. Bidadanure argues strongly for a basic income but also points to ways in which we can design a basic income so that it also delivers a form of universal capital. One option Bidadanure considers is to design a basic income scheme so that people have the right to capitalise their future basic income entitlement. I do not think we should allow people to capitalise all or most of their future basic income stream as this will jeopardise their future economic security. But perhaps people could be allowed to capitalise a fraction of their future income stream. This would amount to a form of universal capital. Another option, proposed and preferred by Bidadanure, is for a fraction of children’s basic income to be paid into CTF/‘baby bond’– style accounts so that when they reach adulthood, they have a basic capital grant. Basic income in adulthood would not be capitalizable, so protecting long-term economic security.
Citizen’s inheritance is not a magic wand for the UK’s problems of inequality, including the unjust inequality towards young people. In my judgement, addressing these inequalities will require a package of radical measures that includes reform of the benefits system towards universal basic income, better public services, taxation of wealth and wealth transfers, and stronger trade unions. But the universal capital grant has a place in the egalitarian toolkit. In designing a new capital grant policy, it will be important to listen to young people themselves and to what they think is helpful. The point is not to restore the CTF but to ask: How can we do what the CTF was trying to do, but better this time – so that the policy becomes part of a new, long-term architecture of citizens’ economic empowerment?
- Bruce Ackerman and Anne Alstott, The Stakeholder Society (New Haven, Yale University Press, 1999).
- Juliana Uhuru Bidadanure, Justice Across Ages: Treating Young and Old as Equals (Oxford, Oxford University Press, 2021).
- Pascale Bourquin, Robert Joyce, and David Sturrock, Inheritances and Inequality Over the Life-Cycle; What Will They Mean for Younger Generations? (London, Institute for Fiscal Studies, 2021).
- Cherokee Preservation Foundation, ‘Financial Literacy’, https://cherokeepreservation.org/what-we-do/economic-development/financial-literacy/,
- Angela Cummine, Citizens’ Wealth: Why (and How) Sovereign Wealth Funds Should be Managed By the People for the People (New Haven: CT, Yale University Press, 2016).
- Darrick Hamilton and William Darity Jr., ‘Can “Baby Bonds” Eliminate the Racial Wealth Gap in Putative Post-Racial America?’, Review of Black Political Economy 37, 2010, 207–216.
- Stewart Lansley, A Sharing Economy: How Social Wealth Funds Can Reduce Inequality and Help Balance the Books (Bristol, Policy Press, 2016).
- Scott McKie B.P., ‘Council approves staggered payments for Minor’s fund’, The One Feather, 1 June 2016, https://theonefeather.com/2016/06/01/council-approves-staggered-payments-for-minors-fund/
- Abigail McKnight and Eleni Karagiannaki, ‘The Wealth Effect: How Parental Wealth and Own Asset-Holdings Predict Future Advantage’, in John Hills, Francesca Bastagli, Frank Cowell, Howard Glennerster, Eleni Karagiannaki, and Abigail McKnight, Wealth in the UK: Distribution, Accumulation, and Policy (Oxford, Oxford University Press, 2013), 119-146.
- Thomas Paine, Agrarian Justice, in Mark Philp, ed., Rights of Man, Common Sense, and Other Political Writings (Oxford, Oxford University Press, 1995), 416-430.
- Thomas Piketty, trans. Arthur Goldhammer, Capital and Ideology (Cambridge: MA, Harvard University Press, 2019). See especially chapter 17.
- Stuart White, ‘Basic Capital in the Egalitarian Toolkit?’, Journal of Applied Philosophy 32 (4), 2015, 417-431.