‘The Bank of Mum and Dad’ – a homely-sounding expression for an engine of social division

Many more people now expect to receive sizeable inheritance from their parents – principally in residential property – than was the case in most of the period after the Second World War

Thursday 05 January 2017 01:08
comments
The expectation is a windfall of around £150,000 for those lucky enough to inherit a house from their parents
The expectation is a windfall of around £150,000 for those lucky enough to inherit a house from their parents

And so the rich get richer. It was always true that inherited wealth was one of the most powerful indicators of the future prospects of individuals cross the social classes. Now, according to the Institute for Fiscal Studies’ careful analysis of the trends in wealth accumulation, the old saw seems to be truer than for many decades. We already know, indeed, that British society is more unequal in the distribution of wealth than income that for the best part of a century: now we realise, as many have suspected, that the trend is about to become a great deal worse. It does not augur well for social cohesion, the creation of a fair society or economic efficiency. We should be worried.

The IFS’s data reveals the revolutionary, and mutually-reinforcing, effect of two major forces in British society since Margaret Thatcher became prime minister almost four decades ago. The increase in the rate of home ownership, coupled with a tripling of property values – even more in the London and the South-east – in that period has created a vast pool of wealth in a relatively small sector of society, almost by accident. No doubt all those who benefited from the residential property boom, and especially those who did so as a result of cut price sales of former council housing – worked hard and saved hard to provide that financial security for themselves and their family. This is not as matter of individual morality or judgement; it is about the wider ramifications for a society where inequality blights life chances and the wider economic success of the country by sealing off opportunities for poor but intelligent and talented children who happen to come from families with no such advantages.

So we learn that many more people now expect to receive sizeable inheritance from their parents – principally in residential property – than was the case in most of the period after the Second World War. The general expectation seems to be a windfall of around £150,000 – tracked not far from the average British house value. Only a minority of the population expected to see such a bequest in the 1930s; now it is much more commonplace – three-quarters or so looking towards that change. That is many respects a cause for celebration; but it carries with it the prospect of exacerbating inequality for generations to come, that is if the present trend for property values to rise continues. It also suggests that regional inequalities as well as inter-generational unfairness are set to worsen. The official answer to that is to inject more and more public money into schemes such as the Northern Powerhouse and the irrelevant scheme to revive grammar schools – but without addressing one of the greatest of the underlying factors in creating the North-South divide.

Some years ago thoughtful politicians considered that the best answer to all of this would be modest wealth tax on private residential property, payable only when the house or flat became available for sale, either when moving or at the point of inheritance. Though such a measure, when the proceeds would be suitably invested in enhancing the life opportunities and economic chances of people and regions left behind by the property boom, many of the grossly disfiguring and economically distortionary effects of the boom in inequality could be addressed and, partially, countered. Yet the public’s well-known aversion to anything like such a tax on property made such a move all-but impossible.

So it is that we have come to live with the nation becoming increasingly divided, with all that that implies. The additional life chances bequeathed by those who parents happened to be wealthy are well understood, and are obvious: a private schooling; and with that increased opportunities to network and gain a more prestigious higher education; funds for a first home purchase, or at least a deposit; plus the various less well-tracked advantages such as more parental time, leisure opportunities and holidays that offer an opportunity to expand intellectual horizons, learn about new cultures and languages, and much more besides.

Colloquially in recent years it was known as “The Bank of Mum and Dad”, particularly the provision of gifts or loans for first-time buyers – a homely sounding expression for an engine of massive social division. It is time to face the cold realties of what is happening. The rich are indeed getting richer, and probably at a more rapid rate than at any time since the Edwardian era. The fashions and the manners may have altered since the days of Downton Abbey, but that is the model of society Britain is moving towards, and more rapidly than many realise. A century of social progress is being unravelled, and few seem to care or even notice.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments