Are the young bearing the burden of the deficit? Should the older generation bail them out?
Baby-boomers must pay up
The baby-boomer generation is the most cosseted, untouchable, powerful generation in our history. To say so isn’t pensioner-bashing, but simply stating a fact. That is the lesson of the outcry over last week’s ‘granny tax’ in George Osborne’s Budget. Even as those in every other generation have seen their incomes fall, and had to consume less, the elderly have been completely protected from Osborne’s axe. Yet when the Chancellor decides to close a tax loophole which fewer than half of those eligible even use, it is denounced by the pensioner lobby as an ‘outrageous assault’. It seems to be the received wisdom that pensioners are a group too powerful for any sane Chancellor to confront. Osborne stands accused of a grave blunder.
Perhaps, tactically, it was. But behind the headlines, the truth is that whatever the individual circumstances of particular pensioners, those in their late fifties and sixties — the baby-boomer generation — are on average better off than they ever have been. They have enjoyed benefits that my generation can only dream of: free university education, greater equality of opportunity — state-school graduates dominated Oxford and Cambridge — affordable houses and a gilded retirement from final salary pension schemes. The Institute for Fiscal Studies has found that pensioners lost far less under the government’s austerity drive than any other group — despite the fact that ‘over the past decade and more, pensioner incomes have risen faster than those of the working-age population’.
Granny is not being robbed to pay down the deficit; she still has her winter fuel payment and her free bus pass. Instead, the bulk of the burden is being borne by mummy; young families are losing the most by far. All this is becoming painfully evident to my generation, the first in recent history which cannot reasonably expect to earn more than the one that came before it. For the first time ever, people in their twenties now have lower incomes, before housing costs, than people in their seventies and eighties. Meanwhile, older generations (and in particular those born between 1945 and 1954) are significantly better off than previous generations ever could have hoped, having seen their incomes rocket.
And that ‘before housing costs’ matters. I live in London, I’m 24 and am lucky enough to earn a decent salary. And paying for a modest room in a shared flat takes a third of my income. If I wanted to buy, I would have to raise a deposit of between 10 and 20 per cent of the value of the flat. At current prices, that means finding something between £25,000 and £60,000 — after tax. If I cannot, then, as the Bank of England economist David Miles predicts, I face house prices that rise faster than average earnings indefinitely, as the supply of new housing is artificially restricted by absurd planning rules. Little wonder that the average age of unassisted first-time buyers has now risen to 44. The housing ladder is, to my generation, something that was climbed by our parents and grandparents.
The idea that the taxman shouldn’t target pensioners makes superficial sense. But not economic sense; not any more. As David Willetts observed in his book The Pinch: ‘The baby-boomers have concentrated wealth in the hands of their own generation.’ Maybe they are not to blame for an asset boom that has inflated their houses to a value their younger selves could never have afforded. But it has happened nonetheless, and this ought to be recognised by the tax system. Given that pensioners are living longer, is it really so objectionable to suggest that some of this housing wealth is used to pay care bills? Or is that to be added to the tax burden of the working-aged?
Pensioners may angrily respond that they were sold the idea of a welfare state on a simple deal: they’d be taxed more in work, but would be looked after in their old age. They may bridle at the idea of their being a burden on society, given what they paid in. But their tax money was, alas, spent long ago — it was a Ponzi scheme, whose defects cannot be blamed on today’s young. Failure to reform may mean the welfare state, designed to cause harmony between the generations, now risks causing tension. The cost of caring for pensioners has soared, because people are living far longer than was envisaged. The state pension rises next week by 5.2 per cent, more than double the average rise in salaries. The burden on the young grows ever bigger. If the British economy were booming, it would be possible to help the young without hurting the old. But we have a stagnant economy, the biggest deficit in our history and a national debt that will mean higher taxes until it returns to pre-crash levels — in about 2038. Someone has to pay more, and placing the burden so squarely on the young is a false economy. The deficit is a shared problem, and so far the only people who have not shouldered a greater burden is the wealthy baby-boomers. We no longer have the luxury of considering them untouchable. It is time that they, too, paid their fair share.
Daniel Knowles writes for the Telegraph.
We’ve already paid!
It’s good to get these things off your chest and it is to be hoped that, having wrung out his self-righteous indignation to the last drop, Master Knowles now feels much better. He has also made some pertinent points: even though I, too, rented in London at 24, unable to contemplate the luxury of home purchase — a luxury sadly enabled, in the end, only by a deposit from a frugal father’s will — I shall admit that my youth as a baby-boomer was easier and, crucially, more optimistic than it seems to be today.
But ‘time we paid our fair share’? When we already have, over and over again? And ‘cosseted’? Cosseted? This, my friend, is where the pot owes the kettle an apology.
As it happens, I heard most of Knowles’s economic arguments rehearsed in a radio phone-in on the day after the Budget, largely by those at least as economically illiterate as I am; an endless litany of the perks, privileges and benefits my generation have ‘enjoyed’ — all listed as if they materialised from nowhere and fell into our laps — and their passing mourned as if, equally mysteriously, they simply vanished. Rather like a toddler pointing to a headless doll: ‘It broke!’ Nuffin’ to do wiv her, no way.
Well, I wonder. Yes, there is economic hardship beyond our cause or ken and, yes, it must be scary as hell. But alongside it runs another unmentionable truth about the difference between baby-boomer and contemporary youth: we worked harder. We did.
And I don’t just mean once we had found our niche on the trading floor, either; we worked harder, from the cradle, because — thanks mainly to our own parents’ war-strewn uncertainties — we hadn’t a shred of today’s youth’s sense of entitlement. The commodity that is labour was a negotiating tool from the moment that, as a child, you took on your share of family chores in return for treats and playtime afterwards. I might not have been sent up a chimney, but you do not have to be big to clean out a grate and doing so went unquestioned because your chums were similarly engaged.
Pocket money was, effectively, payment. You wanted more? You called on every shop in town until you landed a Saturday job or a paper round. (I sold large knickers to old ladies.) The good state schools that Daniel Knowles acknowledges achieved their excellence, in no small part, through the diligence of their students: two solid hours’ homework every night, three at weekends — and I’m not reopening the debate about whether the old GCE was harder than the current GCSE, I’m closing it: it was.
After leaving school, jobs were indeed more plentiful — but dream jobs weren’t. So when I landed a gofer role at the local repertory theatre, I was thrilled to work, sometimes, 80 hours a week. Minimum wage? Don’t be daft.
Consider, now: not a newsagent in sight can find a teenager prepared to rise in time to deliver papers. A work experience girl in a glamorous office was recently asked to take top secret documents to a Famous Person’s home. Excited? She refused to go; she was ‘not a messenger’, not she. Last year I put out an SOS to all student offspring of friends for emergency dog-walking: 12 quid an hour. Not a peep. And when one friend’s lass got an ‘in’ to her dream job — head girl at a well-regarded stables — she left the moment she discovered the roster of working alternate weekends. Why? She couldn’t make it, she explained in all seriousness. Saturdays, she ‘goes clubbing’.
So blame us if you must, young people. But blame us for what we actually did wrong, which was this: we cosseted you. We had money so we gave it to you. We had cars so we chauffeured you. We had cleaners so you never sank to your knees. We indulged you with trips abroad and we invented the wretchedly indolent Gap Year. We equipped you with everything you needed or wanted — except the ability to work hard enough to counter the effect upon you when our rivers of ready loot slowed to a pensioner’s trickle.
If, now, you wish to sulk and begrudge us — what is it in dispute here? Three hundred pounds a year? So be it. But passing headlines and phone-ins aside, last week’s ‘robbing Granny’ story will turn out in the end to be no more than a blip. At least for those of us on the receiving, or non-receiving, end of it.
Indeed, I feel I should let Daniel Knowles and his fellow malcontents into a little secret: when we middle-class, cash-poor, property-rich baby-boomers talk money among ourselves, the conversation is rarely to do with a few bob on or off a pension; it’s much more to do with our aching desire to see Osborne come good on inheritance tax. Because even now, all we really want to do is to take everything that we worked harder than you can imagine to accumulate — and give it to you, you little bunch of frightened ingrates that we love so very much.
Carol Sarler is a freelance writer and broadcaster.