Help build wealth for those without it, don’t cut taxes on those with lots of it

25 March 2024

Bright Blue, the independent think tank, and abrdn Financial Fairness Trust, a trust working to improve living standards and personal finances for people on low to middle incomes, have today published a book, A wealth of opportunities: A centre-right prospectus for wealth, which offers a fresh and radical centre-right vision to help people on modest incomes build up and pass on wealth.

The book includes essays from 21 leading decision makers and opinion formers from different professional, political and social backgrounds, offering analysis and ideas across four key areas: acquiring assets; leveraging assets; sharing wealth; and drawing down later in life.

The collection includes contributions from Sir Sajid Javid MP (Former Chancellor of the Exchequer), Lord David Willetts (President of the Resolution Foundation), Baroness Nicky Morgan (Former Secretary of State for Education), John Penrose MP (Chair of the Conservative Policy Forum), John Stevenson MP (Vice-Chair of the APPG for Taxation), Steve Webb (Former Minister for Pensions), Tim Leunig (Former Economic Adviser to the Chancellor of the Exchequer) and many more.

The Rt Hon Sajid Javid MP, former Chancellor of the Exchequer, commented:

“Without a compelling centre-right vision on spreading wealth, we risk creating a generation that turns its back on the politicians who failed them. A generation that, without any capital of its own, becomes resentful of capitalism and capitalists.”

Ryan Shorthouse, Executive Chair of Bright Blue, commented:

“Especially in today’s economy, meaningful social mobility and security typically derives from income from assets rather than work. But the acquisition of most assets - homes, shares, businesses - is increasingly becoming the preserve of those with affluent parents. The centre-right should be deeply alarmed that Britain is becoming an inheritocracy rather than a meritocracy.

“The centre-right rightly celebrates people building up and passing on wealth. But instead of wasting political capital and fiscal resource on cutting Inheritance Tax - which only helps people who already have lots of wealth - the focus should be on bold policies to help those with no or little wealth better acquire it and then leverage it.”

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Key policy ideas offered in the essay collection include:

Acquiring assets

- Government should offer a capital grant of £10,000 given to every young person at either age 25 or 30 to spend on any combination of four permitted uses: education and trending, deposit for a house, pension saving or starting a new business.
- Relax constraints on high loan-to-income mortgages.
- Ease prudential regulations that deter banks from high loan-to-value lending.
- Expand mortgage insurance schemes to give sufficient insurance protection, encouraging more lending to first-time buyers.
- Encourage longer-term fixed-rate mortgages, with 20-year fix-term mortgages with the ability to refinance as in the US.
- Make it compulsory for rent payments to count towards a credit score.
- Lift the cap on house price for what Lifetime ISAs can be spent on.
- Offer bonds with a rate of return fixed above market rates, restricted to savers under 30.
- Auto-enrolment pensions contributions for the self-employed, matching minimum employee rates rather than that of employers and employees combined.
- Give the self-employed the option to place up to half of their auto-enrolment pension contributions in an ISA.
- Government should match pension contributions from the self-employed, with a cap on the total value of top-ups.

Leveraging assets

- Raise the minimum contribution rates in pensions auto-enrolment from 8% to 12%.
- Expand the range of providers that can offer Help to Save accounts to credit unions.
- Allow banks to market and offer current account holders a Help to Save account.

Sharing wealth

- Equalise taxation on ‘earned’ income from work and ‘unearned’ income from dividends, capital gains and rent.
- Replace Council Tax with a Proportional Property Tax, with a flat 0.48% tax on residential property value.
- Replace pensions tax relief with contributions-based bonuses, paid on individual and employer post-tax contributions and capped at £2,500 per year.
- Reduce or remove the exemption from Inheritance Tax for certain asset classes, particularly agricultural property relief and business property relief.
- Incorporate pension pot assets as taxable assets under Inheritance Tax.
- Remove the residence nil-rate bank for Inheritance Tax and extend the general tax-free allowance to £500,000.

Drawing down assets

- Government should ask estates that qualify for Inheritance Tax and have not left money to charitable causes to contribute 5% of the estate’s value to a National Legacy Fund.

The policies advocated by particular individuals are not necessarily supported by other contributors to the essay collection.

Baroness Nicky Morgan, former Chair of the Treasury Select Committee and Secretary of State for Education, commented:

 “As wealth inequality rises while income inequalities remain consistent, it is becoming increasingly clear that inheritances and family background are the pathways to wealth rather than hard work and talent. Simply, acquiring wealth is more unattainable for Britain’s less affluent youth … It is critical that, as the centre-right, we challenge this.”

John Penrose MP, Chair of the Conservative Policy Forum, commented:

 “Britain taxes income in a thoroughly regressive way by systematically giving a better deal to the rich at the expense of the poor. The ‘haves’ are being subsidised by the ‘have-nots’. It undermines the fairness and legitimacy of our economy, our tax system and our society overall. By rebalancing our tax system from work to wealth, we would be better off.”

John Stevenson MP, Vice-Chair of the APPG for Taxation, commented:

 “The Conservative Party should never be seen as the party of high tax. Instead, we should aim to be seen as the party of fair tax. It being an unfair tax is what did for the Poll Tax – and Council Tax is now basically replicating this unfairness across the country. It is time to be bold and finally right the wrong that Council Tax has become.”

The Rt Hon. the Lord Willetts, President of the Resolution Foundation, commented:

 “Assets matter much more than they ever did before. However, they are also distributed much less evenly than incomes. With no change in the distribution, the overall effect is to make our country feel less equitable.”

Karen Barker, Head of Policy and Research for abrdn Financial Fairness Trust, commented:

“Wealth plays a critical and growing role in shaping individual opportunities, resilience and prosperity in this country. Indeed, wealth continues to rise as incomes remain stagnant, meaning inheritances are increasingly shaping life chances. This collection is an invaluable contribution to the policy debate highlighting the importance of ensuring people on low-to-middle incomes aren’t locked out of opportunities. It is also a timely demonstration that concern for these issues is not partisan- it extends across the political spectrum.”

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