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We’re all aware of the issues of generational unfairness affecting Britain’s young people. Opportunities to earn a decent living, to store up the savings that are so crucial to surviving misfortune or recessions, and above all to be able to own a home of their own are all far more limited than they ought to be.

Troublingly, the real picture might be even worse than it appears – masked by the phenomenon of the “Bank of Mum and Dad”, in which parents shell out to help their children either get ahead or stay afloat. We all know of people who either give or receive such help – be it in terms of a deposit for a house, or some money to pay the bills, or funding their children through university.

There’s nothing wrong, of course, with members of families supporting one another. That’s one of the great boons of family relationships (something Iain Duncan Smith writes about from a different angle on this site today). It is a good and laudable thing when people use their resources to help others, including their own children, rather than just indulging themselves.

But a society in which people opt to help their offspring is different to one in which their offspring urgently depend on that help simply in order to survive. Look, for example, at today’s figures on parents paying their children’s rent. ‘Generation Rent’ has seen the numbers living in private rented accommodation reach a 37-year high, and home ownership is at a 32-year low, not least because few can afford to buy their own property. That in itself is a brake on aspiration and advancement. But even more troubling is the news that nine per cent of renters – over 450,000 households – now rely to some degree on their parents to pay the rent.

In the short term, that paints a depressing picture – not only are younger people too often locked out of the housing market, but many aren’t even really able to access the rental market on their own earnings. In other words, the picture on generational unfairness is worse than it first appears, because even a chunk Generation Rent is being subsidised to be able to live on its own at all. Those whose parents are not able to help them in this way lose out even more, inevitably.

In the longer term, the prospects are grim. The Bank of Mum and Dad once offered a helping hand, where it could afford it. Now it provides essential help which is required simply to get by. What happens when the money runs out, and it goes bust? This generation of parental lenders might be sufficiently solvent to continue shelling out to their children, but those children are growing up – and rather than being able to buy their homes and store up savings of their own, many of them are still dependent on easy familial credit. When they have children of their own, and there is no cash in the bank to pass on to that next generation, what happens?

172 comments for: What happens when the Bank of Mum and Dad goes bust?

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