23 Sep 2014, 1:42pm
personal finance:
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  • the trials and tribulations of the rich poor

    Or should that be the poor rich? Anyway, it’s hurting, and particularly would like to make it known that Things Are Not What They Used To Be. It seems to be particularly through their kids that they are hurting, more specifically that, y’know,

    one does everything one can for Tarquin and Jemima, even, good lord, shopping at Aldi, driving a secondhand Fiesta and forgoing the annual holiday to Tuscany. But it’s really, really hard to make the public school fees, yah?

    Shock, horror, even on £370,000 p.a. we can’t afford to pay to send them to private school these days. Whatever is the world coming to?

    I indirectly know a couple who have had to send the SAHM out to work after 10 years at home to pay for the school fees. Obviously they think this is terrible, along with the beastly Government not giving them child tax benefit because he earns more than 60k. Oh yes, the ermine nodded. How terrible. dreadful, indeed, while secretly asking myself how it was that myself along with the other good taxpayers of England were subsidising their lifestyles and how it’s perfectly reasonable to ice child benefit for people paying higher rate tax FFS. He worked harder than me and earns more than I did, which is fine and as it should be, but me, and indeed someone earning 15k a year for that matter, paying for someone on well over the average wage to have kids? Don’t get me wrong, he was perfectly entitled to take it up when it lasted, but I’m not that amazed it was canned, and can’t imagine it made a huge difference to their lives 😉

    Every so often the Ermine thinks back to the guys getting on their bikes to cycle out or get the bus to the old glass factory in Charlton when my Dad once worked, and where you’d see the wives line up outside the factory gates on Friday which was payday to make sure the money didn’t get flushed down the pub when the end of day siren blew 1. And I ask myself how the heck has Britain gotten so damn soft in 45 odd years that the rich need sponsoring like that – I believe CB was originally targeted at the poor though the history of child benefit is so convoluted I don’t really know.

    How do you know you are rich?

    Easy. You look at all the shit in the external world that tells you that you are great because you have it or consume it. The stuff you have, the size of your house, the services you buy like the au pair, the holidays, the cars you drive, how often you change it, the public school for your kids. For the sake of any non-British readers, in the UK if you deem the universal education paid for from general taxation to be beneath your dignity/requirements you pay for private schooling at what is called a public school, as opposed to a State school which is one paid for from taxation.  I believe Americans quite sensibly called State schools public schools and public schools private schools, because they are logical that way. Go figure.

    I look up to him and down to him - seminal comedy skecth on being rich

    I look up to him and down to him – seminal comedy sketch on being rich

    You look down on people that have and spend less, and you look up at people that spend more. You are rich if roughly speaking there are twice as many people below you as above you 2. To save you the embarrassment of doing this publicly you can head over to those guys at the IFS on where do you fit in. There is a hidden implicit assumption at the IFS that you spend everything you earn with that tool, which is of course not a way to doing well financially

    So why are the rich feeling poor, then?

    The problems for the modestly rich is that they also look back along the time axis at their parents. Say you’re a GP on about 100k, the daughter of medics, and your parents sent you to public school. Assuming you’re married to another GP so the combined income is 200 kilosods, you are still short of sending both Tarquin and Jemima to Eton 3

    Fundamentally the problem is too many other people are getting rich. Although your absolute living standard 4 is vastly greater than that of your parents, your comparative status has dropped, and you feel the draught. You feel poor and hard done-by. Your parents simply had the benefit of fewer rich people to compete with them for finite resources. You will live longer, have better food, better houses, better health than them but there are more people above you in the income scale, because this happened. I know it’s US data

    the 1% are falling back - it's the .01% you want to be in

    the 1% are falling back – it’s the .01% you want to be in

    so I am winging it a bit assuming the pattern is followed in the UK. Interestingly if you look at general plot of the S&P500 over the same period you get to see some similarities

    this is price, not total return, of the S&P500 over a similar period

    this is price, not total return, of the S&P500 over a similar period

    So how do the .01% get rich? From the Atlantic

    How’d they all get so rich? It wasn’t the way the rest of us get rich. It wasn’t their wages. It was something else.

    The richer you are, the more likely your riches come from stocks, not salary. For the three groups graphed above—1 percent, 0.1 percent, and 0.01 percent—capital gains account for 22, 33 and 42 percent (respectively) of their average income. […]

    Practically all the growth in average income at the top comes from stocks. Between 1992 and 2007, the average salary of a top-400 tax return doubled, but average capital gains haul increased 13X. Wages are for normal people. The richest get richer from their investments.

    So now you know what to do. Listen to that Monevator fellow and get on the side of Capital, because that’s where all the action is, and it’s slaughtering Income.

    So what’s with all this public school stuff then?

    That’s the problem for our doctors, and indeed our rich poor. Capital is riding into town and eating their lunch, outcompeting them. The public school system has increased, but not by as much as Capital is increasing. These poor rich people’s mental picture of what it means to be rich is formed in their early years from their parents, but their parents weren’t in such a competitive space. So it stands to reason that the merely rich are feeling poor, and they’re pissed off about it.

    Something that struck me, listening to Mr 60k+ and his SAHM about to go out to work after a 10 year break so they can pay for the school fees is that there’s a category error in their assumption. They assume that by sending their kids to public school they will earn more.

    This isn’t the only reason – public schooling buys you influence, connectivity 5. The fact that entry into public school is selection by parental wealth 6 means you of course keep your kids away from chavvy poor people who make up the 93% of Brits that can’t afford it. You aren’t meant to say many of these things, but observation shows me that people become extremely tribal when it comes to their children – if I had them and I had earned enough I am sure I would send my children to public school too. Just whatever you do make sure you can keep doing it till they are 18 because if you suddenly can’t afford it and they are hoicked out of Eton to be sent to the local comp with all the rough sorts and chavs that make up the rest of the 93% of the population then Tarqin and Jemima are going to have a really, really hard time as the rough sorts take the piss. Not only will they get the detriment of a scummy State education like wot I had but their self esteem will take a bit of a hit.

    As a text-book example of why people send their children to public schools I offer Polly Toynbee, who is strongly for State education – but only for other people’s children. As the Independent says

    She is far from being the only prominent liberal journalist whose children are privately educated, but her head seems to be furthest above the parapet.

    Trouble is there is an opportunity cost, and if these kids are entering secondary school (at 11 in the UK I believe) let’s take a butcher’s hook at the costs. Apparently school fees are £14,000 a year, (update – from this comment it appears I screwed up here and the figure is double that – so double all the school figures from here) so that’s seven years at 14k, or 98,000, let’s call it £100k. There’s a lovely infographic on how much it costs to send your kid to public school on Nutmeg. Add onto that another 50k for university, which starts to look like a bargain. Trouble is, these kids are going to enter a world where humans need not apply. I know every parent thinks their little precious is a genius mathematician with great artistic talent and all round at the pinnacle of human existence, but after we’ve done the Lake Wobegon thing they are up against this

    There is an alternative – the money set into this, accumulated over time and assuming you put the same 14k a year into university (£9k fees, £5k maintenance NOTE TO NON-RICH PEOPLE – MASSIVE WEALTH WARNING for God’s sake don’t pay up front for university rather than a loan until you have read and digested this) then this would accumulate

    savings of school + university fees vs age of child

    savings of school + university fees vs age of child

    to £200,000 of capital. Enough to buy them a house outright in many parts of the UK and/or derive an income of about £5k p.a. Clearly they would have to go to school with the lowlifes that make up 93% of British schoolkids, and going to public school can buy you influence and all sorts of good stuff. But it’s certainly worth looking at the road not travelled, particularly if the child is likely to graduate into a world in 10 years time where humans will find it harder and harder to add value unless they are exceptional. MisterSquirrel has an interesting narrative of the last 30 years of the workplace and the direction isn’t good for the averagely talented. Getting on the side of Capital has much to be said for it…

    The IFS is behind the time with their focus on income

    FWIW the IFS informs me that I am abjectly poor, because it’s all about income. You have to search elsewhere to find out about capital – I got this chart from the government who got it from the IFS. Now unfortunately the IFS often talk about households whereas I always do this calculation as an individual, I believe ELSA is the English Longitudinal Study of Ageing so this assumption should apply to this. I was surprised to learn the the state pension is a capital wealth of 100k and have never factored this into my networth. Let’s just say that my position on this chart is not the same as the one on the where do you fit in site.

    wealth distribution in the UK

    wealth distribution in the UK

    Clearly as a retiree I need to be on the side of capital. But if the rich are feeling poor, then they need to stop spending so much on consumer shit and McMansions and start saving and get their asses on the side of Capital, and particularly if they are going to be realistic about their kids not being poor then it’s time to think outside the public school box. Instinctively they know this, because of the keening noise about inheritance tax and many articles about how to avoid it.

    I personally believe that people featherbedding their kids in the way they want to will lead to huge wealth discrepancies in Britain in a couple of generations particularly as the ability of earn and save capital from income falls for most people. By doing so you will advantage your children which is understandable but the societies they will grow up into will be violent, dog-eat-dog and the English revolution we never had may ensue. But I’m not going to fight that because I don’t have children so I am neither part of the problem nor the solution – I’d expect the revolution in about two generations of IHT being repealed, for which there is strong political pressure. Good luck all those future souls, and I hope the solution is peaceful and equitable.

    It’s worth noting from the school example that the rich poor can give a decent amount to their kids within the tax threshold – even one-year olds have a personal allowance so from a standing start you can give your child 7 £210,000 by the time they are 21, and probably more because of compounding and investment – 21 years is enough to see a good few business cycles. Of course, you also have to bring them up with enough nous not to blow it all as they come of age…

    Notes:

    1. for the record my Mum didn’t need to do this. But I think she did take me to see it as a nipper once when I said I didn’t believe it
    2. this is my guesstimate from observation of people who think they are rich. There is a seminal class sketch that satirises this. In the 1960s being rich didn’t automatically give you class in the UK, but I think it does now.
    3. I may be displaying my chavvy lack of savvy about public schools, because I’m not totally sure Jemima would be allowed into Eton. ‘Cos she’s a girl, bur fear not, we have public schools for girls, so it can be fixed. Whatever…
    4. you know, like how long you live, how warm you are, enough decent food. Humans are odd blighters, because being rich is not about having enough shit to live like a king of days gone by but all about being better than other people
    5. This only really works if you already have connections, so maybe a moot point for Mr 60k+ who doesn’t AFAIK
    6. I’ve never been able to work out if there is an intellectual ability entry standard, or if the smaller class sizes means that they can coach those that used to be called educationally subnormal in my schooldays
    7. It appears you need to take great care to avoid being taxed on the income if the capital comes from you. A junior ISA seems to be the way to go for up to £4k p.a. – I guess if you are saving the full £14k p.a. you can pay for advice in how to do it for greater sums. Laundering the money through grandparents and friends seems the obvious gonzo way to avoid the money coming from the parents but don’t blame me if that doesn’t work – DYOR 🙂

    I saw that article yesterday and instantly imagined what your response to it might be.

    Sir, you have not disappointed.

    Wow! Where does one begin?!

    It is 3 p.m. and outside of where I work the children from the local State School are headed home for the day. Personally I still have a few hours to run in my shop so as a single parent, I would kind of struggle with my son at this hour. Private Schools typically run for many hours yet. My son has a short attention span and seeing him effectively out on the streets at this hour would be a concern to me. Not all 93% are chavs as you seem to delight in saying but there is less discipline, less back-up, less to keep testing teenagers out of trouble. My three nephews all started in the State system and were all transferred (two with help from Grandpaprents and one with a generous Bursary from a renowned Private School to the benefit of a single Mum). Two of the three became real headaches for the respective State Schools in Kent & Wiltshire with disruptive behaviour; arson; carrying a knife etc., and academically they were struggling and as importantly, adversely effecting fellow pupils in such a large class. Mid-stream and removed to Private Schools where they each had greater attention (class sizes were almost half) and greater discipline, they all began to flouris, from half a term to a term. One emerged as a Scholar and the three got into Buckingham & York Universities & L.S.E. In truth, 2 of the 3 boys were liabilities to the State system. Costing the State some, I believe £ 14,000 as I think that is the sum it costs but having been removed, financially at least, that is a lesser burden to the State. I think the figure you quoted for private education would more accurately equate to the State costs and the more accurate sum for Public Schools would average nearer double the sum you quoted.

    Then it comes down to priority. Most kids take Public transport to & from my local State School but there is still a fair smattering of £ 30-80,000 BMW’s & Mercs etc each morning. No idea what percentage but I am also sure that a good percentage of these kids takea Summer holiday abroad. I have an Oyster card for Public Transport as I don’t own a card and last time I took my son on a family holiday would be when he was half his current age. I do however prioritize my meagre remaining income on a private education. That saves the State a further £ 14K or so. It is my choice, not for Chavs versus whatever you elude to, it is simply about the quality of input in his education. One is good, the other is better. A B.M.W. is better than Public Transport; the Cote d’Azur is probably better than London in August; my priority is a more focused education.

    There are some great Schools in the public sector, girls Schools, catholic Schools etc but one rarely gets the choice. You take what you are given. I have four family members who are or have been in the teaching profession, two State, two private. So I wouldn’t be as sweeping as you to say “I see THE difference” but I believe I see some of the differences.

    Post my divorce I have spent almost 3 years effectively homeless – sleeping on friend’s floors; building sites; anywhere I can. A true juggling act when I have a son part of the week. Yet my priority was and remains to keep him in a specific School. I am not going to apologize for my belief that a class of 25, 30, 35, 40 pupils is simply too much for any but the very best of Teachers. And the scale of the State system is one of its flaws. Human nature and human numbers dictate an average. If you take 1,000 teachers, you might have 300 gifted, inspiring, brilliant teachers. That might leave 400 who are a little more, how do we say, average, ordinary, in the middle. And to define that average, we therefore have 300 who are not in the same class. Below par, not great teachers. Having been a pupil myself for some 15 or so years I’m afraid I have concluded that this is an inescapable fact of scale. One might not like it but it is true. Private Schools have the luxury of being able to cherry-pick a greater percentage of those 300.

    Rather than decry our Public School system, wouldn’t it make more sense if our State system made more strides to mimick the Private system rather than dumbing down or doing away?

    The nephew who was given an 85% Bursary engaged in a sport which was categorically not available in the State system. He now not only represents Team G.B. but in his age group has just been rated Number One in the World. Logically not everyone can go to Eton but people have different reasons; different means; different priorities. Schools like Rugby for instance totally means-test; many Private Schools assist directly and indirectly under a myriad of schemes and Bursaries and Charities. Should we toss that away?

    @EarlyRetirementGuy – 🙂 a mustelid needs to sharpen his claws every so often.

    @Tuggy I really am not as much at variance with your view on public schools as you seem to believe. To wit

    You aren’t meant to say many of these things, but observation shows me that people become extremely tribal when it comes to their children – if I had them and I had earned enough I am sure I would send my children to public school too.

    I stand corrected on the cost; I used the nutmeg infographic when researching this which is clearly at odds with your experience.

    The standard counter to your

    wouldn’t it make more sense if our State system made more strides to mimick the Private system rather than dumbing down or doing away?

    is that because the more motivated parents extract their kids and their parental effort from State schools this inherently weakens the State system by taking away the energy to reform/improve State schools. I personally benefited from a selective education so I’d be all in favour of keeping my precious from the chavs, though TBH the old grammar school system I went to would be a very good and possibly better alternative.

    While I’m happy to believe multi-ability teaching helps the dimwitted it hinders the able, and like every other parent I’d believe my child is a genius so obviously only the best would do!

    But you aren’t allowed to think that sort of thing now, and anyway it’s not my problem. Nevertheless your post on the superiority of the public school system kind of implied my State education was below par. I did manage to learn to read and write proper despite the apparently low quality of the tuition. And indeed the chavs kicking a 3ft hole in the plaster when one of the weaker teachers was in charge…

    >The fact that entry into public school is selection by parental wealth.

    Hmm, yes and no. Most independent schools (a less misleading term) select by ability which is typically similar to the grammar school entry system (i.e. top 15-25%). Of course, parental wealth may be loosely correlated with ability/knowledge . . .

    Where there are not grammar schools, then independent schools are the only alternative if you do not fancy the local comp. Many parents, though, pay to move to leafy areas so that they can be close to a grammar school. This is another form of school fees.

    Our nearest comp in London was (and is) a good one, but even at 1km distance we were deemed too far away to be eligible for our son. We were also turned down by the second nearest (which would have been OK). The one we were offered was pretty dire, so it was not a difficult decision to go to a nearby independent school.

    Fees there now are £15k p.a. but we only paid about £6-7k owing to a scholarship and the wife got a new job (which she eventually hated, but is out of it now) in order to fund it. He thrived at school and is now enjoying life at Oxford (which seems cheap by comparison), so we feel it was worth it.

    Like you, I took early retirement and am wealthier in terms of capital than income, but I have no desire to see IHT reduced.

    Ermine,

    Self-defeating argument surely with your: “…superiority of the public school system kind of implied…” as if this was not a pertinent factor or even marginal one, there would be almost no argument to begin with. Apart from the chav separation you allude to (not my motivation) would there be any othyer reason to even think about sending your child to a private School? Nope!

    Big fan of Grammar Schools. My late Mother (School Governor in Tower Hamlets) cursed to her dying day what Shirley Williams M.P. did.

    Why I think emulate the Private Schools is if it costs £14K for State and 40 kids in a class and twice that sum for private and a class half the size, added to the other host of differences with A) facilities and B) time spent then in hard currency we are getting a bad deal from the State. However much money you do or can throw at the State education system I reiterate the funadmental flaw of the numbers game. I don’t know what the Teaching figures are but in the N.H.S. I believe Staff figures are circa 500,000. There are some brilliant people here, people who would save you life, life depends upon etc, BUT there are still people who are average, poor, inept in amongst the brilliance. I have met many teachers who in my not so humble opinion should not be teaching. Funnily enough, met one just yesterday. A while back I dated a Kent School teacher. She was Design & Technology. I asked her about Robert Adam and she said “who?”. Arguably our greatest designer. She would not be up to getting a post in a private School but we have to accept that in the State system.

    Parents. You are suggesting that parents in private education “put in” but State ones don’t or less so. As much as raising the bar by preventing those same people going private, why not endeavour to draw in those in the State sector that are currently not punching at the same weight? People like the Sutton Trust have noble intentions in education, I just disagree in how best to go about improving it.

    Politically speaking any politician is in effect gagged from being honest and uttering a simple truth about education. Children are quite perceptive and can be brutally honest. As such, a child, a pupil will instinctively know when a given teacher is a potential life influencing inspiration; know when a teacher is reliable; but in seconds know when a teacher is second rate or even not be within a country mile of a School and children. Every pupil in a School can know the difference but politicians are not allowed to highlight this. The truth is we have great teachers in this Country but equally inescapable is that we endure the shockers too.

    @SG I didn’t realise there were academic entrance criteria – the mealy-mouthed

    LWC is a socially inclusive non-denominational boarding and day Foundation school

    in the source of this post led me to believe it was fundamentally the size of the numbers on the cheque 😉 Academic selection does of course make the job of the non-State school easier.

    Something puzzles me about being too far from the nearest school but not too far from a farther one, I suppose if everybody applies to the nearer one maybe that explains it. Glad it worked out!

    @Tuggy

    > [superior quality of a public school education] would there be any other reason to even think about sending your child to a private School?

    off the top of my head, and looking at my previous thoughts on the matter there are many peripheral non academic reasons which could include:

    * presumed superior quality of education – agreed, and an academic reason, natch

    * conspicuous consumption – I have drunk too much cheap, and dammit warm! white wine to try and tune out the drone – posh school – drone – so posh -… sending your kids to the Right Public School is dead important to some folks – and they can easily afford it, so it’s the peacock feathers syndrome and needing to look down on other options

    * avoiding chavs – potentially to my embarrassment this would probably feature in my motives 😉 But then I’ve had the experience of school disruption by oiks, fortunately in my day they could expel them and concentrate them in sink schools so they could only trash each other’s education. I gather this is frowned on these days, and they don’t have Borstal for the egregiously criminal thugs.

    * the whole work-ethic – stiff-upper lip values and principles sort of thing, teaching the value of deferring gratification – I fear a little bit of that might also be part of my motivations, and it has nothing to do with passing exams or getting qualifications

    * the whole how to win friends and influence people. At university (Imperial, Physics, late 70s early 80s) there were a number of toffs from public schools and the modest number of State school kids were shrinking violets in terms of confidence – I struggled to even be audible to the lecturer (Physics was a massive department of over 200 people which was a big lecture hall then) whereas the public school kids could make themselves heard clearly from the back. This was not a fundamental speech defect – in my working and indeed outside work life I have been able to address 200 people without amplification

    I am not led to believe that these issues have hugely improved in the State schools from what parents say, but they aren’t part of the measurable targets.

    I fear I had to look up Robert Adam so I accept the general knowledge critique 😉

    > You are suggesting that parents in private education “put in” but State ones don’t or less so.

    I lost this argument big-time with DxGF’s Dad who was a teacher so I’m not sure I can represent it right, but in essence Fiona Millar’s people are saying say you have 100 sets of parents. 20 of them don’t give a shit, 70 are don’t-care-whatevers and 10 are movers and shakers that will kick up a fuss or fundraise or write letters or bitch to the Education secretary using their (probably public-school) connections to get whatever they see as wrong set right.

    Since 93% are in the State system, 7% or those who really care about schooling are likely to scarper. All of a sudden the number of movers and shakers to fix that State school have fallen by 70%. That, I believe is the thrust of the argument why public schools actually damage State schools.

    There is also the issue of finite resources. I certainly recall that my O levels were classes of 31, but after people left at 16 U5/sixth form learning was easier for the simple reason class sizes had fallen to 15/16 and those who were there actually wanted to be there. You got more of the teacher and less of the hum of the disaffected rabble. In the end not all taxpayers are parents and I guess there’s only so much money to go round.

    Why does the DM even exist – these articles exasperate me, it seems as if they’re the anti-FI establishment poking not at the Greggs-class, but the likes of us, who may threaten.

    By the way, do you know there’s also a Junior-SIPP (’tis true!) so a sensible “middle class” family can sock away about 50k each year. Of course if I had kids then I certainly wouldn’t tell them I had been contributing to their 55th birthday since they were born.
    Generational thinking old bean, that’s why there’s always Old Money and New Money – it thinks beyond the now.

    @mistersquirrel – why does the DM even exist – why to provide an Ermine with occasional entertainment and the opportunity to take the piss. Obviously that’s why they commission these articles but what the hell, it’s a dirty job but somebody has to do it!

    Interesting article on how they do it here.

    The Junior SIPP is a fascinating. I span Monevator’s compound interest calculator and compounding at 5% real, a 20k lump sum when the babe is born and nothing else would set them an nearly 300k by 55, referred to today’s money (hence the 5% real rather than 8% nominal common assumption). I know I’ve been cynical about the value of compound interest in real situations but this is one where it ticks all the boxes.

    Indeed, the power of the junior SIPP for the first few years then junior ISAs and a modest grand-parental money laundering scam means the people bitching about IHT needn’t be bothered. A SIPP is fantastic for inter-generational wealth transmission, though I suppose it caps out at the LTA. It’s awesome. I’m amazed the rich ever pay IHT 😉

    23 Sep 2014, 11:09pm
    by grey gym sock

    reply

    i agree that 1 disadvantage for State schools is the smaller number of “mover and shaker” parents. another is larger class sizes – which it would cost a lot to reduce. and better teachers often prefer to teach in private schools, either for higher pay or because they prefer the working environment. plenty of teachers are good with pupils who are attentive and well-behaved, but not good at controlling a more unruly class.

    pupils can fail exams to get into private schools. however, if you have the money for the fees, i’m sure a place can always be found somewhere. standards do vary. also, ISTR it is usually an exam + an interview (perhaps an interview of both pupil and parents). the selection process may be influenced by non-academic characteristics, such as the typical Public-school confidence, which children have already picked up from their parents. i’m sure many private schools are biased towards accepting candidates other members of whose family have previous attended the school. overall, ability is a much smaller factor than in, say, university entrance.

    As someone whose kids thrived in state schools, both coming out with good degrees (the youngest is currently writing up his PhD) I have always been uneasy about the message that is given to children who go to private school – i.e. that they are somehow “better” because they have had a private education.

    A sense of superiority and entitlement does very little to foster social engagement and responsibility and no-one’s kids will be end up happier in your “dog-eat-dog” society.

    It is a truism that real education is not about passing exams and I believe that a broader, more expansive and tolerant view of the world is fostered by mixing with young people from different backgrounds.

    By letting our children find their own way in the state system we might not be buying them a better job, but we are more likely to be setting them on the path to wisdom – a far more valuable asset in the end.

    23 Sep 2014, 11:18pm
    by grey gym sock

    reply

    contribtutions to a junior SIPP are limited to £3,600 per year (the same as for adults who don’t have earnings higher than £3,600).

    the tax avoidance strategy would generally be for parents to pay into junior SIPP and junior ISA, and let grandparents or other relatives make gifts into a bare trust (where the child’s £10k personal allowance and £11k CGT allowance can be used). not that this blog is supposed to be about tax tips for the genuinely rich …

    @grey gym sock Interesting – I know someone who considered teacher induction with a day at Kesgrave High, a nearby well respected State school and came away with the impression that the crowd control aspect was ghastly and teaching was not for her. I guess this is part of the whole focusing on boosting self esteem culture.

    The junior SIPP limitation isn’t too much of a hardship in terms of setting up the 300k by 55 – just takes 5 years, but I guess it’s a serious limit on transfers. Surely all gifts come off the 10k personal allowance, so maxing a ISA and SIPP gets within2.4k of the personal allowance? and of course such a child may be a 40% taxpayer or whatever it is then after 55. Anyway, that’s other people’s problems and they can afford to pay to work it out!

    @Cerridwen for the record I wasn’t advocating the dog-eat-dog society – merely musing on what would happen if the IHT abolishers got their way. I’ve taken enough stick from people who think IHT is an abomination whereas I think a wealth tax that’s collected when you’re pushing up daisies is perfectly reasonable. Indeed for those that hate the wasteful government getting it etc if they just buried it with you that would sort the dynastic wealth problem, as long as some went into security to stop grave robbers.

    John Oliver on the wealth gap is a lighthearted take on the serious issues – it is telling that because a lot of wealth in the US is largely built on dynastic foundations there is only one person of colour in the Forbes top 400 wealth. Hat tip to Paul Claireaux.

    I think the fight is already almost lost as far as ordinary people building wealth from income, which is why I think paying for public school education so your kids can earn more is probably a misallocation of capital.

    Those starting work now might be able to build some capital, if they are both lucky and talented but their kids won’t be able to build wealth through income to compete against Capital. I managed – none of my networth comes from inheritance, but that will have been a blip in the story, when it was worth capital investing in training and in paying people for skills people could easily acquire. The “humans need not apply” is pretty convincing to me, as long as energy and resource crunches can be stalled/overcome…

    Your 70% – 20% – 10% equation on the parents perfectly illustrates and amplifies my biggest single concern with the State School system in this Country. Politicians can say that of parents but politically incorrect to say about teachers.

    Can’t criticize you one iota re Robert Adam but a Teacher in that specific field, I think I can. And will!!

    So much to tackle, add, subtract from your last post (and some interesting additions from elsewhere) but sadly I have to help George Osborne fill his coffers.

    Cerridwen, I think your point or argument was far, far more valid say 30 years ago. I was at Marlborough College on Monday and the first thing the Headmaster said was that his pupils had a role to play in Society in general, to give back, help, get involved, here in the UK and abroad. 30 years ago all Private Schools had a single theme (ours was via Sports and for underpriviliged kids in Peckham). These days however, these similar Schools are now working on truly multiple fronts. There will always be Toffs & Barrow Boys alike who strive to extract the last English Pound & Eskimo Pence and at times to the detriment of their neighbours but an ever increasing emphasis is being put on giving back, being aware that they are priviliged in a 7-93% split not merely their own category. I have known literally scores who have gone to places like The Balkans; Afghanistan; Kurdistan; Africa; Asia, amongst others and simply in helping others (non Military). Many to their own risk and indeed three of them dying in the process. Amidst the colossal wealth created from the Industrail Revolution, often by unpleasant means there also developed a strong sense of public duty, charity and benevolence. I think these latter qualities are far more in evidence today than a generation or two back.

    FFS, you’d think people on £370k could spell “forgoing” correctly, eh? Or maybe it was a journalist who couldn’t spell? No surprise there.

    “I believe Americans quite sensibly called State schools public schools and public schools private schools, because they are logical that way.” Not just Americans; that’s the Scottish tradition too. Maybe that’s where Americans got it from, much like their use of Principal instead of Headmaster, or Janitor instead of Caretaker.

    “at 11 in the UK I believe”: 12 in Scotland, unless they’ve changed it without my permission.

    “Clearly they would have to go to school with the lowlifes that make up 93% of British school kids”: oh come now, nobody with any money sends the nippers to school with the lowlifes. They buy semi-private education – they buy an expensive house in the catchment area of a superior state school, pay for tutors in the evening, swimming lessons, music instruction, tennis coaching, etc, etc. You must surely have noticed your friends getting up to these larks? One of mine was very proud of his success at it, all the while decrying people who paid school fees. He thought they were mugs, whose taxes subsidised his children’s schooling. He was hoping somehow to use their non-private education to wangle them into superior universities too.

    We moved our daughter from a state primary to an independent one. Surrounded by a green playing field, with its own swimming pool, contrasted with a tiny tarmac playground and netball court. Mind you, the one with the tarmac was the independent one. It had bigger classes too. It was the primary department of an ex-Direct Grant Grammar School, knifed in the greatest act of philistinism in British history. Cromwell’s church-wreckers didn’t hold a candle to Shirley Williams and her crew.

    @Tuggy there are notable similarities in your approach and what mine would have been had I had kids, but I’m going to play against type and be devil’s advocate in the interests of balance 🙂 first some background –

    I am personally a great fan of academic selection. Not surprisingly, because I personally benefited from it. The 11-plus had just been abolished but the grammar school simply set its own entrance exam, there are more than one way of skinning a cat, there was also an interview with the headmaster for both me and my parents.

    In the 1960s and 70s schooling was openly elitist – resources were unashamedly targeted at the able. Those were selected on exit from primary school, the academically able went to grammar school, the rest to secondary moderns or the new comprehensives, which in my part of London were sink schools when they started. I am not of a middle class background – my Dad was a fitter and my Mum a SAHM. Selective education gave me a massive break in the upwards mobility department which is why I end up 40 years later in the right half of that wealth chart and retired early. I believe I did add value to the companies I worked for, so the investment in my education probably did accrue to the taxpayer eventually through HRT payments and a continuous 30-year employment record until retirement bar six months at the start.

    So I am all for selective education. And I benefited from the post-war focus on the able, particularly the academically able. And I believe mixed ability teaching is great for the less able and bad for the more able. For example I was taught to read by my mother before starting school. Two thirds of the way through primary school in New Cross (this would probably now be regarded as a modestly deprived area of London), where half the kids still could not read, they set the half of the class that could read to help the half that couldn’t. This experience alone taught me that I never, ever, ever, want to be a teacher. I can and have taught people who want to learn a skill, but I have no aptitude to teach those that don’t give a shit, nor those that are too dim to follow examples. I had a reasonable success rate as a child teacher, but only because the real teachers spotted I was poor with the exceptionally slow – I ended up with ‘does not suffer fools gladly’ on the report for that term. The directed the modestly behind at me and these improved reasonably fast. The experience also taught me that while the more able can improve the lot of the less able, the less able drag down the more able. If I had children, through the Lake Wobegon effect I would expect my child to be in the upper 25% and this fact would therefore piss me off no end 😉 Whether that were true or not – people just aren’t rational when if comes to seeing how their offspring compare with others.

    1960s London recognised that drag, it recognised that the economy needed more skilled talent than it had people (which I suspect is not true now) and pushed that by focusing effort on the upper quarter of the ability spectrum.

    However, whenever I’ve debated that with people from teaching, I’ve been shot down enough times to be able to reproduce their arguments, even if I don’t back them. These are:

    academic selection inherently hurts the less able because they can’t see that ‘it can be done’. Put harshly and non PC, those left behind see a sea of mediocrity around them and normalise it. The corollary is that selection benefits the more able because they see examples that show them it can be done, plus the less able don’t get bored in their classes and start to kick up/throw things/punch the crap out of the swots. The counter to this is that it’s an unfair allocation of resources – grammar schools targeted the top 25% of the population, why are bricklayers’ taxes being spent on doctors’ children etc.

    Over the years the focus was shifted to trying to improve the lot of the lower end of the ability spectrum. In my day these were labelled educationally subnormal and concentrated in special schools so they didn’t disrupt other people’s education. It’s now not considered acceptable to do that – as a society compassion has trumped effectiveness. Massive resources were brought to bear on this. The old system probably did write off people too readily.

    Apparently this was highly successful and as a result we now have 50% of school leavers that are smart enough to go to university. When I entered Imperial 7% of school leavers went to university – three years later when I left with a BSc I believe it was 11%. On the other hand universities didn’t have to set up remedial maths courses because things like differential calculus were new to their blessed A****A+++A************++ university entrants. FWIW I failed second year maths at Imperial roughly at the point of Gauss’s flux theorem because I wasn’t clever enough, but I am happy to say that even now I wouldn’t need remedial entry maths – I learned differential calculus for O level maths. So something has obviously gone wrong in some areas.

    You are critical of the quality of State teachers, but in their defence they have a much much harder job. Not only has 7% of the ability cream been skimmed and 70% of the parental engagement siphoned off but their classes are larger, fewer of the parents give a shit, indeed it appears some of the parents can’t even educate their children to being ready for school. Over fifty years ago I am happy to say that everybody who started school with me knew what the bog was and how to use the damn thing.

    I could be a competent teacher in a public school, given enough training (I have taught adults and could probably teach motivated children). I would, however be one of the incompetent teachers you grouse about in the State system – the job of crowd control, particularly when you have no parental backup and larger, low ability classes is that much harder. Grey gym sock indicated better teachers preferred public schools, and heck, I would too. Easier job, can impart knowledge and get the reward of seeing the lightbulb moments, more pay and you don’t have the crowd control problems – what’s not to like?

    The argument from the teaching profession seems to be yes, public schools do achieve better results, but much of this is because they inherently do the cream skimming job, both in terms of ability and backing resources but also in terms of parental engagement, let’s face it, if I am paying 20k p.a. for something I’m gonna be engaged in the result 🙂

    I’m glad I never had to make sense of this ghastly mess as there seem to be losers whichever way is taken forward. Fiona Millar indeed agrees with you on the outreach activities of public schools – ideally she’d like to abolish public schools altogether but conspiring with the outreach departments is her second best preference and she acknowledged the most practicable.

    @dearieme I am the journalist that can’t spell 🙂 That little sketch at the top was my creation so the illiteracy is mine too. Although foregoing is how I would have written it, it seems to be tolerated by both my spellchecker and Oxford?

    Shirley Williams iced my direct grant grammar school too – they converted to an independent school just as I left.

    @dearieme my bad – bugger – okay, hands up and white flag time. Logical rather than lexical error, thank you 🙂

    24 Sep 2014, 5:10pm
    by Grumpy Old Paul

    reply

    If public schools did not exist, you can be certain that there would be a massive improvement in state schools.

    Does anyone know what the situation is in European countries such as France and Germany?

    Facts please, not polemic or pedantry.

    BTW I’m rather inclined to agree about grammar schools although I attended a very early and very good comprehensive school followed by a Russell Group university. My school benefited from highly committed teachers and engaged parents. I remember the head of maths leaving the school because he disagreed with the introduction of mixed ability classes for maths; he returned in his own free time to give after hours lessons to some of us sixth formers. What a shining example of integrity and commitment!

    IIRC, immediately after the war, people on the left of politics argued in favour of grammar schools because of the opportunities which they offered bright working class children.

    BTW Margaret Thatcher should probably be held responsible for the closure of grammar schools during her spell as education minister! Search on Thatcher and grammar schools.

    @Grumpy Old Paul – I have some connections with Germany and indeed my maternal grandmother was a maths and physics teacher in a gymansium which corresponds to our erstwhile Grammar schools. A decent English summary of the system is here and another take which seems similar at first glance here

    I haven’t heard the same existential angst about schools over there as seems routine here. this seems to indicate the move from Grundschule to the next stage is like Britain 40 years ago

    In the last year of Grundschule (usually the fourth year), the decision is made as to whether pupils will attend the Hauptschule (firth to ninth year), Realschule (fifth to tenth year), Gymnasium (fifth to twelfth or thirteenth year). Gesamtschule is offered in some regions in Germany as an alternative. It combines these three types of high school and offers differentiation at a later stage, based on performance.

    The system is quite rigid with the pupils placed into the different types of schools based entirely on their academic performance.

    Gymnasium takes the upper 25% academic ability which is the same as grammar schools used to here. There seems to be deliberate redistribution of resources between states to even school funding which seems to be missing in the UK.

    “BTW Margaret Thatcher should probably be held responsible for the closure of grammar schools during her spell as education minister!” Not really: during the 1970 election campaign Ted Heath had promised that the government would not stop comprehensivisation as long as the local authority in question didn’t have a botched plan. Thatcher therefore felt obliged not to veto any application that showed that the LA had done its homework. Views may differ, I suppose, but I wouldn’t myself class that as being responsible for: reluctantly acceding to, because of a campaign promise made by someone else, perhaps.

    “academic selection inherently hurts the less able”: not in the experience of our family. The one child of my generation who attended a Secondary Modern is forever grateful to it: it was able to specialise in rescue teaching – it taught her to read and write properly, for instance. In a mixed ability class in a Comprehensive she’d have been sunk.

    I’ve never seen anyone make a remotely plausible case for education being about the only activity known to mankind where specialisation doesn’t work. Teaching very clever and very stupid children together is as mad as having the English teacher teach Chemistry.

    There were two secondary schools in my home town – the highly academic Catholic school and the ‘other’ one, which is the one I attended!

    All classes were mixed ability, with the exception of Maths, which was split into two Sets. I recall the kids who struggled in the top Set would deliberately fail mid-term tests so that they would be put in the lower Set, which was a bit daft as it meant limiting their chances of getting a higher grade.

    Anyway, I (and my siblings) all did well going to a bog-standard school, all went to uni, all got good degrees, all got good jobs.

    Maybe we were just lucky or maybe standards these days just aren’t what they used to be! 😉

    Today is a TEXTBOOK example of what I mean. BBC announcing that Ofsted have concluded that bad behavious in Schools is scuppering on average an hour a day, 30+ days a year. As they say, “unacceptable”. Rather than take it on the chin, exactly as you and I as a pupil would have to if criticized by a Teacher, Teachers on the Beeb today are coming out and saying: “terribly demoralizing for Teachers…” etc. Very hard to improve if one doesn’t begin by accepting there is a problem and there is this sanctity, this holiness around both NHS & Teachers. We must understand that there are brilliant & gifted Teachers; many more more average; but alas some bad Teachers. Then there’s a chance to improve.

    I have one child only, do I sacrifice his education for something 30-40 years down the line? Noble prospect, I may well be being selfish but I only have one life so I am looking at now.

    My local Comp (vastly better now with an excellent Head, new uniforms, new building, new attitude etc) BUT up until a few years ago, the rarely seen local Police would have to provide 9 Officers to see these same Schools kids out of the School gates and onto local buses. That is a ludicrous situation on all levels, least of all financially. A few weeks back, off campus but one of these children was stabbed to death. Knife and other crime has been if not rife, at an unnaceptable level in my book. Why the F should I risk that?

    Last night I slept on my Shop floor. Rather than rent, that is my priority to now take my son to a fee paying School in 20 minutes time.

    I have run a shop for over 30 years and as such employ people. Incidentally, an equal split between private & State educated. Thus an unequal splilt in terms of 93-7%. My customers, even those that live locally come from every Country across the Globe and they understand the English language but alas not this Street lingo that too many local kids indulge. Occasionally they walk into my Shop asking for a job. A depressing high percentage have an agressive attitude, swagger and I genuinely, genuinely struggle to understand what they are saying and English is their first language as mine is. If I struggle to comprehend, my customers will do so and more. It is a bit like my old School reports: “could do better”. I have two employees currently, one State, t’other privately educated. They both communicate well and have a modicum of aptitude (what I look for, not exam results). I wouldn’t shy from employing from the local Comp if they hit that basic standard. sadly, 90% who walk through my door, don’t. That’s what we need to change. In an International World, the English language should not be dissed but used as our best asset to help the U.K. in the business World. The State sector needs to stop apologizing, where it does so, and look to improve.

    You have lit the blue touchpaper here, Ermine. In relation to the grammar police, forgo would have been correct in the context rather than forego.

    “All classes were mixed ability, with the exception of Maths”: did they explain by what miracle only the teaching of Maths could gain by a bit of streaming? Or was it silently assumed that only Maths was important enough to be taught in the best way?

    Some of the observations and indeed mine show that everybody’s experience of education is individual, and we’ll champion what worked for us. But I’ve never learned in mixed-ability; I’ve never learned in a secondary modern or indeed in a local comp.

    The public schools do seem to be a tragedy of the commons for the rest, if only because there’s no particular place that favours the able but poor and make the work of the State schools harder, though these are less well funded. Nevertheless, if I’d had to get in there I would favour my own, so I’m not gonna knock anyone who does too. At the same time I can see why people tear their hair out about the topic when viewed in the round.

    @Tuggy – some of your experience is a particular experience of teachers, but the poor discipline and attention probably reflects wider social trends in parenting. It’s not just the schools/teachers that have changed over the last 30 years. FWIW I recall poor teachers too, but they didn’t have the same discipline problems because they were generally backed by the parents, which isn’t the case now in some areas.

    I’m not sure the State sector can improve – it needs more resources to push down class sizes, parents who are more involved. Presumably that’s the thrust of there being good State schools besieged by middle class parents who are motivated but not rich enough to pay fees, a sort of winner takes all effect which then concentrates low achievers on both sides of the desk in sink schools. Which might explain why some people had a good experience of regular State schools – they were in those areas!

    @Jim Lad – yep, initially I assumed this was an issue of orthography. Then I actually read what Oxford said was the meaning of what I was saying, and realised the error. I’ve found it always good to run up the white flag in the face of superior knowledge – it improves the craft!

    I just wanted to say that I have just been to see “The Riot Club” and the message it gives is simplistic, formulaic and sensationalist but it does deliver a small kernel of truth. Educational privilege, bought by wealth rather than ability, (if that is what a private education actually does deliver) makes a travesty of democracy because it completely overrides any notion of equality of opportunity. See it if you can.

    And, you guys, what’s with the continual state school bashing!! There’s some amazing teachers out there getting great results from fantastic young people with plenty of engaged parents cheering them on. I was one of them 🙂

    @dearieme

    No, I never knew why it was just Maths that was taught that way. Us kids would have been the last to know!

    Still, the disruption was probably minimal compared to today, since teachers back then could always threaten (and dish out) corporal punishment.

    @Cerridwen exactly the case I’d make for keeping IHT 🙂

    I think it’s clear a private education buys better odds for a child whatever their innate ability. Partly by clearing out disruptive elements, partly by being better resourced, and partly by making the job easier and more rewarding for the teachers, who probably waste less time on crowd control and can reasonably count on being backed by the parents compared to State schools who a left with the rest – most of whom will do fine, but some will struggle, not necessarily through any fault of their own.

    That doesn’t decry the work done by teachers in State schools – it’s inherently a more difficult job. Indeed I actually did some work for the teachers earlier this year and didn’t come away with the same opinion of them as Tuggy f’rinstance. But then I only saw a sample. In particular the emphasis on metrics and garbage like that which was much less in the past seems to make the job of State school teachers particularly hard, because the processes of measurement seem to consume a disproportionate amount of resources – I’ve heard that from non NUT teachers too.

    The thesis of The Riot Club supports any individual parent’s decision to go for public school. I don’t have the experience myself, but observation shows that a parent will clamber over others to get what they perceive to be the best for their children. Who wouldn’t buy the influence, and the confidence I observed in the first term at Imperial? In that respect public schools are a classic tragedy of the commons.

    26 Sep 2014, 11:38am
    by Marky Mark

    reply

    Weenie’s hit the nail on the head.

    ‘Streaming’ was common in my schools for both Maths and English (comprehension, grammar, literature appreciation, etc). We even had a streamed exam system with GCEs and CSEs, with borderline cases (i.e. me!) entered in both.

    And the miscreants were dealt with swiftly and physically with no fears of reprisals from parents and social services.

    Schools realised that kids only get one stab at an education and it shouldn’t be screwed just because they were in the same year as kids suffering from Absent Dad Disorders and the like.

    None of this appears to have done any long term damage to my generation – so why it needed to change I have no idea (though I suspect Socialism had a big part to play in it). With a son now entering his final years at primary school I too will be doing the most I can to make sure he goes on to the best school he can – it’s human nature.

    (Right that’s enough coffee for today, methinks…)

    I watched the video and was both appalled and optimistic at the same time. Appalled for the future labour force, optimistic we will get better health outcomes, lower road deaths etc.

    As a parent I have chosen to send my children to state school, though in an area where the schools are very good and the general environment leafy and well to do. I want the best for them but I am also of the view that given good schools “for free”, then my capital will be better spent helping them in the future in some other way, e.g. help with housing, starting a business or some other enterprise.

    Coming back to the video all I can think right now is the best educated will have the best opportunities for longest, until the autos take over. Society may figure something out but I won’t bet on it. Following Ermine’s sentiment I think capital will win out and investing and owning is the best hedge for their (and my) future.

    What are the chances of the DM running a piece about spending less time at work and more time with your kids as a way of giving them what they need? Who knows, perhaps give up the control freakery and let them attend the school of their own choice, as if they were sovereign individuals rather than chattels expressing your status.
    Nope lets make up some tat nurturing fear and doubt in people about their own abilities as parents and if we can implicitly smear teachers in state schools so much the better. The only critique I can offer is they could have bought in the rising cost of private medical insurance for children too.

    […] The trials and tribulations of the wealthy – Simple Living in Suffolk […]

    29 Sep 2014, 12:12pm
    by John of Hampton

    reply

    Interesting article as ever, and what a deluge of comment it has provoked. I am not sure Shirley Williams should take all the blame re. the Grammar Schools, though. Mine was closed down by an Education Secretary called Margaret Thatcher. Whatever happened to her?

    Ah, J of H, if your school had only taught you to do your homework, you’d have seen that myth dispelled above.

    30 Sep 2014, 12:32pm
    by BeatTheSeasons

    reply

    According to my favourite news website the middle classes are having to resort to leaving private school prospectuses lying around:
    http://www.thedailymash.co.uk/news/society/middle-class-parents-leaving-public-school-prospectuses-lying-around-2014093091188

    […] up the numbers on our mortgages, at least. The poor could go on holiday/afford to buy food and the rich could afford to send Tarquin and Jemima to public school, although they would probably bid the price up with the new found money they weren’t pouring […]

    […] most of my working life I was paying towards my colleagues’ child benefit, though I am very happy that this has been stopped now. They are/were rich enough to pay for their own choices in […]

    […] age. The LA times has a mini series on the shrinking middle class. Unlike the British middle class whinathons and SAHM child benefistas and grizzling journalists that I’ve taken the piss out of earlier […]

     

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