Is inheritance really a toxic topic in Scottish politics?

Scrooge McDuck.jpgIN the struggle to reduce the gap between rich and poor in modern Scotland, is there such a thing as a free house? And if not – if the transfer of assets from parents to their children is thwarting aspirations of social mobility – why won’t our politicians come out and say so?

This week, as they tussled over the merits of a tax rise for the highest earners, it was reported that an 1980s-style inequality spike is on the way thanks to a combination of Brexit and the UK Government’s tax and benefits changes.

In the context of this gloomy forecast from the Resolution Foundation, the SNP’s plan to stick with the status quo might, to the casual observer, seem hard to understand. After all, haven’t we been promised a more progressive approach to taxation for Scotland that will mitigate some of the worst excesses of unchecked Tory power?

But it’s not quite as simple as that. By declining to use the limited tax-raising powers that are widely considered a poisoned chalice, Nicola Sturgeon is dodging a bear trap. Not because it’s guaranteed that the highest earners would quit Scotland in the event of a modest income-tax rise (although they might), but because tinkering with tax on honest graft will do nothing to address the inequality that arises when a significant proportion of the population receive – in return for doing precisely nothing – a house, or part of a house, or in some cases just a pile of money to spend as they please.

Inheritance tax remains reserved to Westminster, so there’s no danger the SNP will be accused of inaction if they query the fairness of this situation. One might imagine, therefore, that they would be keen to point at this elephant in the room as it drops dung all over their plans to create a more equal Scotland. Instead, they remain silent about it, the 2013 White Paper was silent about it, and everyone who personally stands to gain a free house simply clips a clothes peg on their nose before entering the room, and stays silent about it too.

Increasing low wages will not address the large-scale perpetuation of inequality by inheritance

Increasing low wages will not address the large-scale perpetuation of inequality by inheritance. Raising taxes on high wages will not do it either. Help-to-buy and shared equity schemes will not correct the distortions that arise when people use unearned wealth to buy properties – on the contrary, they just help to further inflate a housing market that’s sustained by inequality.

South of the Border, where inheritances are highest, this topic is not taboo. Just last July, Theresa May warned about the increasing divide between “those who inherit wealth and those who don’t” – though her proposed solution was to build more houses rather than address the gulf in spending power between people in these two categories. She pointed at the elephant, but merely suggested sprinkling pot pourri on the dung. A few months earlier, when Jeremy Corbyn and his shadow chancellor had tried to start a discussion about inheritance, former Labour spin doctor John McTernan frothed in The Telegraph that “a Labour party that punishes aspiration is one that will in turn be punished.”

It’s an odd notion, that of aspiring to leave or collect a death-linked jackpot

It’s an odd notion, that of aspiring to leave or collect a death-linked jackpot. If McTernan is right that this is untouchable territory, policy-wise, then it’s surely time to admit that reducing inequality sounds like a great plan when it means throwing a few extra fivers to the unfortunates at the bottom, but a terrible one if it means reducing the windfalls awaiting those at the top.

This isn’t about revenue-generation for the government of an independent Scotland. It’s about encouraging people to spend their own money while they’re alive rather than hoarding it as a gift for adult children who, by the time their parents kick the bucket, should be capable of standing on their own two feet. The biggest inheritances are received by those already earning high salaries – unsurprisingly given the many, many benefits of growing up well-off – so those who start off rich tend to stay rich, while those born penniless can work as hard as they like yet always face an uneven playing field when it comes to buying a home.

Perhaps what’s needed is increased awareness of what we’re actually talking about when we talk about inheritance

Much is made of the disincentives to work that arise from complex systems of benefits and tax credits, but little is said of the idle rich who benefit from the something-for-nothing situation so forcefully defended by the likes of McTernan. The Scottish Government’s poverty tsar Naomi Eisenstadt has identified an inheritance tax hike as a key lever for cutting inequality, but shares his view that it would be “toxic for politicians” to propose. Are they right, though? Perhaps what’s needed is increased awareness of what we’re actually talking about when we talk about inheritance.

According to the Institute for Fiscal Studies, nearly half of the wealth held by today’s elderly people aged 80 or over will flow to only 10 per cent of individuals in the younger generation, and any notion that this elderly generation worked hard for every penny is quickly dispelled by reference to house-price trends over recent decades. In this context, is it really outrageous to ask them to, say, contribute to their own personal care, rather than funding yet more jumbo-sized mortgage deposits from beyond the grave?

Perhaps this really is a toxic topic – but until someone has the courage to start the debate in Scotland, we’ll never know.

A version of this article first appeared in The National. You can read letters in response here and here.

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