Back in September 2017, The Guardian reported that “Britain’s generation divide has never been wider.” Inequality between the different generations has caused the division; in 2016, a poll revealed that millennials will be poorer than their parents because they have to face an “intimidating mix of evaporating jobs, unaffordable property and rising debt.” The government’s failure to find a resolution to these issues is angering millennials and making them feel isolated from the rest of Britain.
Fast forward to May 2018, and the intergenerational commission of research and policy organisation the Resolution Foundation has claimed they can help bridge the rising economic strains between generations. Following a two-year study (‘A New Generational Contract’), the foundation has proposed a number of “radical moves”: hand 25-year-olds £10,000, and tax pensioners more by making the earnings of those above state pension age (66 plus) subject to National Insurance (NI) contributions.
Lord Willetts, head of the Resolution Foundation, said that the grounds for these proposals are twofold: young people are being locked out of the housing market and the older generation want a properly-funded healthcare system. The UK’s ageing population means that spending on health, care and social security is set to rise by £24 billion by 2030 and by £63bn by 2040. As for young people, research produced by the Resolution Foundation has highlighted that they are earning less today than the generation before them were earning at the same age. What’s more, a study found that people born between 1981 and 2000 are only half as likely to own their home by the age of 30 as baby boomers (born between 1946 and 1965) were at the same age. Young people spend around 25% of their income on housing today, while at the same age baby boomers spent just over 15% of theirs – the generation before that spent only 5%.
The foundation has said the NI contributions would pay for a National Health Service (NHS) levy of £2.3bn, whilst the £10,000 to all young people when they turn 25, irrespective of income, would come from abolishing inheritance tax and replacing it with a lifetime limit for recipients of £125,000 before taxes kick in (an estimated total of £5 billion); this money is intended to help young people get on the property ladder, set up a business or improve their education or skills.
Further recommendations by the foundation include scrapping council tax and replacing it with a new property tax (targeting wealthier home owners), and using the proceeds from the property tax reform to halve stamp duty for first-time buyers and increase public funding for social care. The Resolution Foundation has also proposed that those with more money should contribute privately to a social insurance system to help pay for social care in older age.
It’s too early to know whether the government or opposition will implement some, all or none of the Resolution Foundation’s proposals, but they do have a habit of “cherry-picking ideas from such reports and including them as party policy,” said news website the Actuarial Post.
One of the proposals in particular has snatched all the headlines: giving young people a £10,000 hand out. Granted, there are probably many young people drooling at the prospect of being given ten grand, but this specific suggestion has also produced some negative reactions. The Guardian reported that “in practice it would be like putting a plaster on a gunshot wound,” whilst AJ Bell’s senior analyst Tom Selby commented that the move feels like a gimmick “that will never see the light of day.” Even those who back this particular proposal know it could well be money down the drain if not used wisely; however, the commission has said it could only be used for education, housing, starting a business or towards a pension.
One concern raised is how much can £10,000 really do if you’re working in the gig economy, in an unskilled job or on minimum wage? The Guardian stated that the one-off lump sum wouldn’t be enough for millennials to put a deposit down on a home, be able to afford to have kids, or be able to have a quality of life like the one their parents have. Some millennials say £10K would barely affect their finances, given the cost of housing today and the extent of student debt; ten grand would only just cover the first year of a typical university degree, for example. It seems young people are getting the raw deal; the new generation are watching their brothers and sisters go off to university, only to return home three years later and take on jobs that look nothing like the ones they were promised in their uni prospectus.
The proposed move of taxing the elderly hasn’t gone down too well either; one Guardian reader commented “after years of governments deliberately creating austerity, we now see the way out: tax the elderly, thereby making them less financially safe, despite their hardworking for pensions, and the government can walk away smiling. Disgusting.”
What’s your view on the proposed changes by the Resolution Foundation? We’d love to hear your thoughts in the comments section below.
Want to stay up to date with the latest news and opinions? Subscribe to UKCBC’s HND newsletter.