Wow, in the UK?

Yes, but it’s just a proposal as of now, from an prominent think tank that has come up with this seemingly stupendous idea following a two-year research.

What’s exactly on offer?

Well, according to the Resolution Foundation’s intergenerational commission, every individual in Britain should get £10,000 from the government as a Citizen’s Inheritance when s/he turns 25. The Foundation thinks this will help address and even fix forever the “broken” intergenerational contract between millennials and baby-boomers — roughly meaning the current crop of youngsters and their parents.

Sounds a tad quixotic. Why should the state spend like this?

If you’ve seen the way income inequality has been spreading in the UK, and across the globe in general, you’d give it a thought. In the UK’s case, wealth distribution has been quite uneven in the past few years, creating a big gap between the income levels of youngsters and, say, their parents.

But can’t they inherit wealth?

Not all are that lucky, given the way income distribution has been skewed towards the rich. Even there, there are other issues. You may recall, the UK is among the many countries that have an inheritance tax system. Currently, any transfer of wealth above £1 million (a little over ₹9 crore) attracts a levy of 40 per cent.

What will the youngster do with this money?

The idea is to help young people find a new house (rent or buy), study further or start a business. Such wealth redistribution will also help reduce the (now) palpable bitterness towards those who were born between 1946 and 1965 (baby-boomers) who enjoy better pensions and incomes than any other generation.

But how will the government find this money?

Therein lies the rub. The Foundation thinks tweaking the UK’s inheritance tax could help the state cover this expense. It suggests that all inheritances under £500,000 can bear a levy of 20 per cent, while anything more could be taxed at 30 per cent. The government can use the extra revenues from this new inheritance tax system to fund the Citizen’s Inheritance.

Such a succour is best-suited to countries like India, I feel.

To be frank, India doesn’t have a proper inheritance tax system to start with. If you remember, we had abolished inheritance taxes (the erstwhile estate tax) in 1986. And bringing back such a system again will not be easy, as the recent comments from ADB president Takehiko Nakao have shown.

What did the ADB say?

Nakao said the growing inequality is an important issue to be addressed and he feels one cannot let the market decide everything. But many economists, especially those on the right wing, think that taxing the rich is a bad idea and might boomerang in a highly heterogeneous and disintegrated country like India, causing a flight of capital.

Still, some welfare measures for the youth would be ideal.

Many think a revamp of the social welfare regime can make a difference. Even in the advanced economies, policy-makers are now more prone towards enhancing social security. Maybe offering assured loans to enterprising youngsters to start businesses (something the MUDRA initiative has tried, but at a much more flexible level) can help address the income inequality issues among the youth.

Still, UK’s dole sounds no-holds-barred.

It is not. The Foundation suggests that the grant should run with strict riders; people should not splurge it on clothes or drinks. The money should go to meaningful investments that can help address income inequality.

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