If you want an idea that explains recent British politics, try this: older people with money and houses are given stuff by the government, funded from taxes paid by younger people with less money and fewer houses, and who are given less stuff.
New Social Market Foundation research, kindly supported by RateSetter, shows how Britain is divided between people who own things and people who don’t. We focused on saving. We knew the overall savings ratio is low and falling, but that national aggregate conceals a significant fact: many people are saving nothing at all.
To be precise, 14.4m working-age adults are saving nothing. Some 16m have less than £100 in savings. One in six say that they’d last no time at all if they lost their main source of income. Most of these have low incomes; many are Theresa May’s “just about managing” families.
On the other side of the divide, the vast majority of the people who are saving are managing. Some have enough money to have put aside more cash than the three months’ income they need for the proverbial “rainy day” of redundancy or a household crisis.
Around 6m savers have more than the equivalent of three months’ income in cash savings and many hold much more: the average “cash excess” here is £32,000; savers are sitting on around £200bn excess cash.
Investments including UK equities, bonds, or innovative products like peer-to-peer loans would all deliver much better returns for them (as well as providing a huge capital boost to UK business).
The tax system also pushes people towards cash savings, especially through tax-free Isas. Ministers have made Isa increasingly generous: the tax-free limit has risen from £11,520 in 2013/14 to £20,000 in 2017/18. This is despite the fact that 75 per cent of people saving in Isas invest less than the maximum, so increases in that limit only benefit the richest who can afford to save the full amount.
Allowing people to save tax-free costs the Treasury money in lost revenue.
The bottom line is that a lot of public money is being allocated to people who have enough money to help them put aside quite large sums of cash.
Meanwhile, people who lack the money to save anything get none of that public money currently allocated to Isa limits.
That’s not just unfair, it’s politically unwise and fuels the angry idea that the system is rigged. That anger should be answered with sensible, fair policies which make it easier for more people to own things, and make Britain into an asset-owning democracy.
That’s not a new idea or a new phrase, or property of any one party. Margaret Thatcher in 1979 promised a “property-owning democracy.” In 2007, Gordon Brown said he would make Britain an “asset-owning, wealth-owning democracy”.
One of our ideas for delivering on such promises is to take the money currently assigned to raising the ISA limits and give it to youngsters. From 2020, every 15-year-old should be given £1,500 to invest in cash and non-cash assets, and hold until they turn 18.
Everyone, whatever their background, would start adult life with assets of their own.
Small-state free marketeers find cash handouts hard to swallow -- but the state already hands out quite a lot of cash in various forms, and many of them – triple-locked state pensions, winter fuel payments, higher-rate pension tax relief, and Isa limits – entail giving stuff to wealthier, older people that isn’t being given to younger, poorer ones.
All I’m suggesting here is that some of the money the state gives away is diverted away from people who already own stuff and towards people who don’t yet own stuff, in the hope that Britain can become a country where more people own stuff.
This wouldn’t just be fair, it would be popular too. No-one won the last general election. But the party that can make Britain into that long-promised asset-owning democracy could win the next one.