Intergenerational unfairness has become a real problem in the U.K. Addressing this should be one of the governments top priorities.
The policies being put forward by today’s politicians are worryingly short-termist. For the most part, voters in the United Kingdom are content to approve of the hand that feeds them. We are incredibly proud of our National Health Service and social welfare system, and defend them vigorously. During the 2017 election, the Conservatives hastily abandoned a policy in which the cost of end-of-life care would fall upon the recipient. Jeremy Corbyn’s radical policies involve spending more money on social protections – and a ‘New Deal’ for old people. Yet nobody is willing to talk about the young.
The old have a huge amount of political capital, and as it turns out, a considerable amount of economic capital too. For the first time, over-65s now have a greater share of UK wealth than the under 45s. Pensioners receive roughly £8,200 a year from the state pension, not an insignificant sum of money, despite a Money Week writer calling the UK state pension ‘the least generous out there’. University students frequently live on sums of money much smaller than this, yet nobody is considering increasing maintenance loans. Additionally, two-thirds of retirees have a private pension in addition to their state pension, so the £8,200 per annum figure is rather misleading.
The rationale for spending more on the state pension is dubious. State pensions are quite literally Ponzi schemes. To pay dividends (pensions) to the existing members of the scheme (pensioners), the government (Ponzi) must continually find new investors (taxpayers). The pension pot of gold at the end of the rainbow only exists while several millions of leprechauns (taxpayers) keep filling it with gold. What will happen when the leprechauns go on strike, run out of gold, or begin dwindling in number? Young people today will be poorer than their parents, and the Institute for Fiscal Studies believes that inheritance will not alleviate this problem. Many talented young graduates are moving abroad to find better opportunities and avoid student loan repayments, which will create an even bigger dent in the public purse.
Intergenerational inequality is the great evil of our time. A society that fails to make young people stakeholders is a society that has abandoned the future. Unlike our parents and grandparents, we have borne the costs of our education, and British students have become the most indebted in the world. Student debt will reach £1 trillion or 11.5% of GDP in the late 2040s, a burden that will inevitably be passed onto the taxpayer considering current repayment rates (see: UK2020). Of course, taxpayers in the 2040s will be those same young people who were irresponsibly loaned vast sums of money before their 18th birthdays.
Young people today do not just face being poorer than their parents, but also missing out on the opportunities that their parents took for granted. The average age of a first-time buyer in this country is now 33 and rising. Wage stagnation has defined the post-2008 economic environment. Young people are the future, and ignoring their genuine complaints is so shortsighted one is obliged to recommend a trip to Specsavers. We do not begrudge our elders their government spending, and understand when they consume 40% of the NHS’s budget, despite making up only 18% of the population. But we must speak up for our own interests.
The four biggest sections of the government’s budget are pensions, healthcare, social security and education, in that order. State pension spending is almost double our education budget. In real terms, education spending has been consistent, hovering around £85 billion per year. But as a percentage of GDP, education funding has been falling for several years, from almost 6% of GDP in 2010 to 4.4% of GDP. Like the government’s pillaging of the Ministry of Defence, education budget cuts are a direct result of the needs of an elderly population and a government which always keeps its promises to the demographic most likely to vote for them: homeowning pensioners. Insultingly insignificant gestures such as a £10,000 handout for those under 55, or a 30% discount on rail travel until the age of 30, do not address the deeper issues.
A real move towards solving the problems that we have identified would be to increase education spending. As a society and an economy, we benefit immensely from a well-educated and highly skilled workforce. It is perhaps the best way to meet the incoming challenges of automation and an ever more skilled jobs market. Spending more on education and improving Britain’s awful productivity might even generate the tax revenues needed to increase state pensions while working less. Certainly, if we attached as much importance to our education system as we do to the NHS, we might see radical improvements across the system.
Morally, as a society we cannot focus all our attention on the old. They may very well have paid their fair share and built the institutions that we all enjoy. But preserving these institutions for the future demands that we prioritise those who will become the custodians of the system. Continuing to throw money at the NHS will not guarantee the future of the NHS. Temporary solutions to short-term cashflow shortages will not secure the taxation base required to support the long-term future of the social protections and healthcare systems.
Young people today do not yet have a stake in society. We must give them one, but to do so will require bold thinking and a willingness to prioritise the future over the present. We must grasp that the future is now. For the health of society, we must address the inter-generational divide now, lest it become unbridgeable. Investing in young people has no downside, and it will allow us to build the future we all desire.