‘Young people feel they don't have a stake in society.’

Sir Craig Oliver, former Downing St. Director of Communications

Anyone who cares about inter-generational rebalancing could not help but be profoundly concerned about last week's Budget. Young people have been bumping along at the bottom for years, but we really hoped for a refocusing across the generations with the new UK government. What we have received is the priority being placed on huge additional spending for the health service, which will primarily benefit old people, and a very substantial increase in national debt.

There’s no mention of the chronic problems caused by student debt which, together with housing pressures, is pushing them well into their 30s in terms of independent living and family formation. Meanwhile the huge increase in employers’ National Insurance will disproportionately impact young adults: as Iain Martin wrote in his Times article last Thursday, the labour market is going to get even tougher for the young. He quoted a friend’s comment as follows: ‘All tax and no incentives to grow. My view — no more hiring and just roll out AI instead’.

Meanwhile the huge increase in spending on the health service seems to rule out our proposal for requiring wealthy old folk to be required to have mandatory private health insurance on which the NHS could draw as its services are used. And while the huge increases in national debt are nominally reserved for capital spending, the fact is that it will be young people who have to service it over the decades ahead.

No wonder Sir Craig Oliver made the above quote during BBC Question Time on Thursday evening.

Inter-generational rebalancing plays a very big part in these commentaries, and two of the initiatives for which we were really hoping in this Budget were:

  1. Implementing The Share Foundation’s call for a ‘Default Withdrawal at 21’ process in order to release hundreds of £millions of Child Trust Funds lying unclaimed with HMRC-allocated account providers. I scoured the HM Treasury Budget Policy Paper for any hint that this was happening, without success.
  2. Acknowledging and supporting The Share Foundation’s initiative in introducing incentivised learning for young people in care, which is leading to very significant reductions in NEET status. While there is a provision in the Budget for an additional £1 billion for children with special educational needs, there is as yet no indication that this could benefit young people in care.

Tony Blair's rallying cry in 1997 was, ‘Education, Education, Education’. There was no George Orwell ‘Nineteen Eighty-Four’ newspeak then — he really meant what he said. Major advances were made in the education system and, in order to enable young people to start adult life with some resources, Gordon Brown introduced the Child Trust Fund scheme to benefit all children born in the United Kingdom from September 2002.

In contrast, Rachel Reeves rallying cry is ‘Invest, Invest, Invest’ — except that it is distinctly Orwellian, because it really means ‘Borrow, Borrow, Borrow’. Investment requires business plans and defined internal rates of return (IRR): you won't find any such projections within the Treasury's policy document. Not surprisingly, the media is full of critique for using spin in an attempt to disguise what is, in fact, a very large old-fashioned Labour Budget.

But even if the focus was on investing, it's important to consider its time frame as well as well as its IRR. Long-term infrastructure projects are plagued with uncertainty: consider HS2 as an example. How can the raft of projects cited by the Chancellor represent anything other than injecting economic activity over the term of this government? It's not so much investment, it's economic stimulation fuelled by a huge increase in borrowing.

However, it remains a tragedy that democratic governments find it so difficult to concentrate on the needs of, and the prospects for, the young people in their populations. Perhaps in the UK we need to take a step backwards, and to explore how more could be done in terms of economic analysis across the generations.

The Office for Budget Responsibility was created in 2010 to provide an independent authoritative analysis of the UK’s public finances. It carries out economic and fiscal forecasting, evaluating performance against targets, sustainability and balance sheet analysis, evaluation of fiscal risks, and scrutiny of tax and welfare policy costing.

Its website covers a large range of publications, but it's hard to find any analysis of the relative treatment of different age cohorts as a result of government policies. I do appreciate that economists tend to concentrate on aggregates rather than relative outcomes, but there are plenty of the OBR's publications which do look at relative outcomes, whether in terms of geography (e.g. the devolved nations), corporates (e.g. as a result of Brexit) or welfare (e.g. health and social care).

Here are some of the aspects which the OBR might consider in terms of their impact on younger generations:

  • The substantial increase in public debt, which future generations will have to service and pay off;
  • The fact that the increase in employers’ National Insurance and the lower thresholds at which it will apply will disproportionately impact the young in terms of fewer employment opportunities;
  • No change in the student debt burden, and its challenge for home ownership and family formation;
  • The fact that increased inheritance tax receipts are primarily being used to fund shortfalls in the NHS, which mainly involve care for the elderly; and
  • What the impact might be of introducing mandatory private health insurance for wealthy old folk.

We have made a strong case for reforming and repurposing inheritance tax, and have been particularly focused on the logic of ring-fencing or hypothecating its receipt for the benefit of disadvantaged young people. The Chancellor’s changes have understandably led to a significant increase in planned IHT income: HM Treasury envisages its annual receipts building to c. £10 billion by the end of this parliament, from the current £7.5 billion. However, there is no hint of hypothecation; so the increase will simply go to fund the additional costs of servicing the NHS and the national debt. If the OBR were to analyse generational impact, they might conclude that the failure to hypothecate IHT represents a lost opportunity in terms of inter-generational rebalancing.

We should therefore ask the OBR to prepare a regular, published analysis of the realistic treatment of different generational cohorts, with particular focus on the relative impacts on young adults and senior citizens; and to show how this treatment has changed over the past few decades.

This analysis would provide a strong basis on which HM Treasury could be required to provide a clear picture of how its Budget proposals would impact these different age groups. It would also encourage young adults to take more interest in government, on the basis that they would know how they were being treated by different political parties. Perhaps then Sir Craig Oliver’s quote at the start of this commentary might cease to be the fact.

In the meantime, we must continue to press for fair treatment of young people, with particular focus on the huge legacy of dormant Child Trust Funds belonging to low-income young people and set up by the previous Labour government.

This country can offer young people a much better future than super-sized government debt and welfare subservience. Now is the time to deliver hope, but there’s much more chance of that objective being met if the OBR gets involved.

Gavin Oldham OBE

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