‘How the Baby Boomers Stole Their Children's Future’
David Willetts, from the title of his 2010 book, ‘The Pinch’
The seven Labour MPs who were ejected from their parliamentary party after voting to abolish the two-child benefit rule against Government policy should stand back and look at the big picture. This is not a matter of making small adjustments in welfare benefits — inter-generational injustice is deeply ingrained in our whole economic system, and it requires wholesale reform.
The reasons why it has got so much worse over past decades are legion. Certainly, the fact that political engagement among the old is so much higher than for young adults has made matters worse, particularly in the United Kingdom: but so many other macro-factors have been at work. David Willetts described many of them in his book ‘The Pinch’ published fourteen years ago, but inter-generational disconnect has got much worse since then — particularly as a result of migration, but also notwithstanding the fact that his own party has been in power throughout that period.
The 2010-2015 Coalition Government's escalation of student debt placed a further major psychological burden on young adults. Meanwhile, the prolonged period of ultra-low interest rates has pushed asset prices out of reach for young people, at the same time enriching many old people. Then, to cap it all, the pandemic has not only severely disrupted so many young people’s education and entry to the job market, but also its legacy of significant levels of ‘Working From Home’ by senior people continues to seriously damage the ability for young people to benefit first-hand from their experience and management skills.
However, it's not just a problem for the young: we also need to tackle the mantra of early retirement, with so many who should now retain their mental and physical capacity to work well into their 60s and 70s. Our thought for this week sets out some of the key features needed for a wholesale reform to tackle inter-generational injustice.
If there was the capacity in public finances, the solutions for resolving inter-generational injustice would be comparatively straightforward. That's not the case; hence the Government's decision not to change the two-child benefit rule for the time being. As we commented on 8th July, debt is at colossal levels for a range of reasons, including the legacy of seventy-five years of socialist welfare, governments which have focused on their comparatively short term of office, and an excessively generous furlough response to the pandemic.
We must tackle this debt mountain: and the wholesale reform needed for inter-generational injustice needs to be accommodated as well.
So, it's sensible to start with areas in which the old could contribute a great deal more to public finances. We've referred on many occasions to the need to introduce mandatory health insurance, accessible by the NHS as it’s used, for wealthy old folk, but there's also a need to keep people working longer. We are not alone in this respect — The Times reported last Saturday that Beijing is set to end China’s era of early retirement.
This calls for a nationwide programme of training for those approaching old age: how to keep mentally and physically fit, and interested in continuing to work, rather than becoming a ‘couch potato’. The result would be increased tax returns and lower health and social care costs — a double boost to public finances.
There are also changes that we could make in order to improve use of work premises, by reducing business rates and introducing a more progressive residential rating system. This would not only introduce a new vibrancy for local economies but it would also provide an improved environment for young people to find employment, and to learn from the experience of senior managers.
Turning to the needs of young adults, we must do something to tackle both the economic and the psychological impact of student debt. Long-term application of this system, significantly increasing the burden on graduates so that they can still be paying it off in their 50s, has now been in place for twelve years, and it's high time that a review should take place. The scale of student debt (c. £236bn) is already too massive for large-scale reductions in the short term, but we should certainly explore ways of addressing it.
As we've said in many of our commentaries, there is a strong case for treating Inheritance Tax (IHT) levies wholly separately from general taxation: ‘If we are to break the cycle of deprivation, the most logical solution is to empower disadvantaged young people with some of the assets left behind by wealthy old folk when they die. The human life cycle will always be with us — we need to accept it as a feature of constitutional justice’.
As public finances are gradually brought under control, there should be a programme to hypothecate more of IHT receipts for the direct benefit of disadvantaged young people. Of course, some help could be given from this source to alleviate the low-income element of that student debt burden: but assistance needs to be tightly focused on the wider range of young people who also face the biggest challenges of disadvantage and disrupted adolescence.
The Share Foundation is building a real depth of experience in this respect. Over one thousand young people in care from 145 local authorities have now completed steps of its Stepladder Plus incentivised learning programme: 61% of these participants have taken at least four of its six steps, earning an average £885. Nearly one third of these young people will be aged 19 or over in November 2024, when the Department for Education takes its annual snapshot of the NEET rate (not in education, employment or training) for adult care leavers: currently this stands at just over 38%, compared to the general rate of 12% at 19. The Share Foundation’s survey of Stepladder Plus participants who have completed at least four of its six steps is currently reporting just over 24% as NEET, reducing that excess by more than half.
In 2015, the National Audit Office published a report on the lifetime public finance cost of adult NEET care leavers; this was estimated at £56,000. Following nine years of inflation amounting to 34.1%, this cost would now be £75,000. The saving to public finance as a result of The Share Foundation’s work is therefore already providing a benefit of over £6 million; this was generated by philanthropic contributions of £889,000 to fund the step incentives — a return of over 600%. The monetary benefit is, therefore, very substantial, but its real contribution is in transforming these young adults’ prospects for the future.
Incentivised learning is therefore proving its worth in providing attitudinal transformation for young people from disadvantaged backgrounds. Its value is in encouraging participation on a continuing basis, during which the attitudinal change sets in. In a world in which so many young people see nothing but despair and lack of opportunity, incentivised learning has a major part to play in tackling inter-generational injustice.
Gavin Oldham OBE
Share Radio