Universal Inheritance

Commentators, politicians and others often call for more equality of opportunity. This so often does not ring true, mainly because there is a widespread pretence that equality of opportunity has nothing to do with the distribution of inherited wealth. This pretence is part of a pervasive taboo on the subject of the positive redistribution of inherited wealth which. if mentioned at all, is quickly dismissed as unimportant or irrelevant. It is often said that it is education that matters as far as equality of opportunity is concerned - not inherited wealth. But where there is a taboo, the lurking truth is crucially important.  Equality of opportunity and the distribution of inherited wealth are inextricably linked.

Those who benefit from the pretence that equality of opportunity has nothing to do with the distribution of inherited wealth - and so from this taboo in media, political and public discussion - are the heirs in the next generation of families that own most of the business, farming and shareholding wealth in the country, vast amounts of which have been and are received by them completely free of tax as a result of a series of scandalous exemptions, while others pay 40 per cent tax on receipts above £275,000 including homes, and others again receive no inheritance at all, ever.

We all pay a high price as a result of these inauthentic calls for equality of opportunity, this pretence and great taboo. That is that there is far less equality of opportunity, entrepreneurial activity, home ownership and a sense of community than there could be; also there is far more alienation, crime and policing costs, far more inequality, far more poverty, far more social exclusion and far more welfare state dependency than there need be in Britain and in other open democratic capitalist countries. This adversely affects millions of people. It causes taxation on the stream of income and expenditure to be far higher than it need be. It also puts unnecessarily at risk the stability of our and other open democratic capitalist countries.

The dream - the possibility - that arises in response to this inauthenticity is Universal Inheritance - inheritance of capital for all young men and women. This will bring about a transformation of - not just a change in - our and other open democratic capitalist countries. In a similar way Universal Suffrage - a vote for all - was a dream - a possibility - that arose in democratic countries in response to the inauthenticity of pretending that there was a democracy when women did not have the vote. Votes for women has already brought about a transformation of - not just a change in - our and other open democratic countries.

THE FOLLOWING LETTER WAS PUBLISHED BY THE FINANCIAL TIMES ON MONDAY FEBRUARY 6 2004

FINANCIAL TIMES  - LEADERS AND LETTERS
Monday September 6 2004

  Reforms that would really alter our inheritance

From Mr Dane Clouston

   Sir, Peter M. Smith (Letters, September 1) asks: "Why not just put 1p on the top rate of income tax and scrap the whole complex mess" of inheritance tax?  Eureka!  Continue to tax income that is earned and capital gains that are created or made up to 40 per cent - or 41 per cent if Mr Smith has his way - and allow all receipts of wealth that the recipients have done nothing to earn, save or make to be received tax free.

  The rich are getting more rich than the poor year by year.  We should do nothing about it, should we?  All that talk of greater equality of opportunity is so much eyewash.  Who cares that some people start off their lives with £billions and others with nothing?  Who cares about financial and social exclusion?    Never mind the alienation that comes with it.

  Never mind all the houses that will be owned by the rich and rented by the poor.  Democracy will live for ever, as the country becomes ever more unequal, with the rich living behind gated communities, and the poor shut outside.  Just be tough enough with policing and keep the lid on the kettle of illegitimate aspirations.

   But there is an alternative way to look at that 1p on the top rate of income tax, which is raise revenue so as to stop taxing capital to cover current expenditure.

  Then reform the taxation of inheritance by lowering the starting rate of a progressive tax to 10 per cent for most beneficiaries, and linking it to amounts received instead of to types of assets left and gifts made.

   Abolish exemptions except between husbands, partners and wives.  Use the vastly increased proceeds of such a Capital Gifts and Inheritance Receipts Tax to broadly finance a £10,000 British universal inheritance, itself subject to the 10 per cent tax and so equivalent to a £90,000 exemption for those inheriting more than that from other sources,  for all young UK-born men and women on their 25th birthday.  (The average wealth of all adults and children in UK at the end of 2002 was £85,000 according to the Office of National Statistics).

   Now that would make a difference to equality of opportunity, and alienation, home ownership, entrepreneurial activity, policing costs, welfare state dependency, etc.  That could even incorporate the ridiculous Baby Bonds, clawing them back in tax from inheritance billionaires rather than needlessly adding to their fortunes. 

   By redistributing in this way the ownership of the stock of capital at the point of transfer from each generation to the next, it will be possible to reduce the rate of taxation on the flow of income and expenditure within each generation by considerably more than the equivalent of 1p on the top rate of income tax [if Mr. Smith's figure is right] of the £2.5 billion take from the present exemption-riddled 40 per cent inheritance tax. 

DANE CLOUSTON,

Director, OPPORTUNITY - The Campaign for British Universal Inheritance,

Oxford OX44 7AT