What I'd Tell Rachel Reeves

The questions we don't want to confront...

Welcome to Dr Eliza Filby’s Newsletter, a weekly substack that looks at the world of your parents, yourselves and the potential future for your kids through courses, speeches and writing.

This community is now nearly 6000 strong and includes many readers who support my work. If you’d like to learn more about me, check out my website. You can also watch/follow me on Instagram.

Inheritocracy: It’s Time to Talk about the Bank of Mum and Dad came out last Thursday and temporarily sold out on Amazon.

It’s now back in stock across all bookshops, and if you fancy supporting independent booksellers and live in South London, try ordering it via Backstory, a bookshop in Balham where I wrote Chapters 7 and 8 of the book!

Inheritocracy Book Launch

What I’d Say to Rachel Reeves…

In the 1980s, economists at Harvard discovered a connection between expected inheritance and the level of care that adult children gave to their elderly relatives. Rich parents received considerably more phone calls and visits from offspring. Those who received the most attention of all were sick, affluent and had two or more kids competing as beneficiaries.

Let’s assume that this is not how most of us approach elder care, and yet it highlights a fundamental truth that is being lost amid the debate about Labour’s reform of inheritance tax: inheritance and care are inextricably linked. We know we are living through the largest transference of wealth in history as the Baby Boomers pass on trillions of pounds of wealth. But there is a problem here: most of this inheritable capital is in property and vulnerable to being gobbled up by social care costs. People are living longer but with complex medical needs and in an age when the traditional army of family carers – women – can no longer be relied upon to do it. As finance expert Samantha Secomb told me: “[Boomers] will have to use that money. Their millennial daughters… won’t be able to take time off work to do the care and it costs so much, there will be little left to pass on.”

All of this matters, because since the financial crisis we have seen the emergence of an inheritocracy. Trickle-down economics hasn’t been happening much in the economy, but it has within the family. The Bank of Mum and Dad routinely stumps up for adult children – as education funders, and deposit lenders, absorbing the financial shocks of their children but also offering a safety net and springboard. Billions in gifts are transferred down the family tree each year, particularly accelerating in the last few months due to fears of what is to come in the next budget. Only four per cent of estates pay inheritance tax, which points to the fact that we have created a system that encourages aggressive tax planning, shifting capital into other tax loopholes, notably grandchildren, the AIM market and even agricultural land.

But that’s some families, and certainly not all. There are many more who cannot release money early, and whose wealth is tied up in their property. While 80 per cent of millennials anticipate some kind of inheritance, many may find that this is eaten up by their parents’ social care costs. We have created an inheritance system where parents pay out for their kids’ adulthood but not their own eldercare. One financial advisor told me his client base could be slotted into three camps: those who are saving for care; those who are deliberately whittling down their assets to preserve inheritance and not pay for care; and finally, the majority, with their head in the sand. I also interviewed a series of affluent elderly women to talk about their care plans. One thing stood out: complete denial that it’s something they should think about and anger at the thought that the family home might have to pay for their care.

It was precisely this outrage Theresa May faced when she blundered over the Dementia Tax in 2017. The family home, inheritance and care are highly sensitive issues that politicians have learned to veer away from. May’s successors, Johnson and Sunak, both pledged to deal with the social care crisis and didn’t. There was complete silence about it during the recent election campaign. Meanwhile, families are confronted with the brutal truth when the unenviable time comes. Annual care home costs of £56,000 per year – more expensive than Eton – and potentially needed over a number of years. This is impossible for most families to pay without releasing existing savings or assets.

We are, as has often been said, sleepwalking into a care crisis, one which the inheritance economy and the Bank of Mum and Dad are inadvertently making worse. Most Britons believe in the right to inherit, but few are aware of the actualities, complexities and, as Paul Johnson of the Institute for Fiscal Studies has pointed to, the vital challenge in an inheritocracy, which is “to make inheritance matter less”. This question hinges not only on our dependency on the Bank of Mum and Dad, or closing inheritance tax loopholes, but confronting the question none of us want to answer: how do we pay for elder care?

The Reading Room

1. 52% of Gen-Z professionals don’t want to be middle managers, according to new research from Robert Walters revealing a growing disillusionment with mid-level management roles amongst younger professionals in the UK. There’s never been more talk about leadership, never been more workshops, learning and development and guidance on management - so why does this generation not want to lead people? Maybe it’s because they themselves were managed poorly during the pandemic and felt they lacked good role models. Maybe it’s because they are questioning a system that doesn’t reward those with good people management skills but those who are just good at meeting measurable targets. Maybe because they feel we have dehumanised the workplace with digitalisation; our diaries now look like they did in school and there is very little time for the care and attention necessary to lead people well. Frankly, managing is more stressful than ever.

2. Fees are going up in the UK but should all courses be treated equally? According to data from the Dept of Education, graduates studying health from the University of Sunderland were found to be earning just £14,600 after five years, the lowest graduate salary of any British degree. This contrasts with the degree that commanded the highest salary - Computer Science at the University of Cambridge, which resulted in nearly £100k per annum. Both courses cost the same, but for how much longer?

3. Have you taken a 23&Me DNA test? The company’s stock is nearing delisting, and after shutting down its drug development unit and multiple layoffs, the entire board resigned—except for CEO Anne Wojcicki. As the company struggles, it may be that they consider selling the business, along with the DNA data of 15 million customers. It’s a fascinating story with huge implications.

And finally…..

Pinch-me moment…. My dad would have loved this, a HUGE poster for my book at Tooting Broadway station (others across London as well!) It’s situated in the corridor to the northbound platform, a place my father walked passed perhaps 5 days a week for over 70 years, in Tooting Broadway where he lived his entire life and now where I am raising my family.

That’s it for this week, thanks for reading

Eliza