‘Rachel front-loaded the good stuff: higher NHS and welfare spending, higher public investment, but the difficult choices were pushed into the future.’
former senior adviser to No. 10
It's not an easy time to be taking over at the Treasury. Inflation and bond yields are pushing upwards, public sector debt in the UK is approaching £3 trillion, and the Government is continuing to see higher than expected monthly deficits. Unemployment is close to its highest level for five years at 4.9%, and spending on benefits continues to be stubbornly high. Meanwhile, high demands on public expenditure remain — particularly on defence, as our new Chancellor John Healey is very aware.
Also, generational unfairness is acute, with the combination of major student debt burdens for university graduates and very high levels of unemployment for 16-24 year-olds.
The answer can no longer be found in short-term fixes. As we commented on 27th July, wealth taxes will simply drive people and their assets out of the country, whereas Reform’s plans for harsh axing of benefits would drive huge levels of civil unrest, and still more poverty.
It's therefore time to reconsider the long view, and to ask whether, over the past half-century, Government has taken on more responsibility that it can afford by providing universal, rather than targeted, support.
As Jason Cowley points out in The Sunday Times on 23rd August, cracks started appearing in the ‘Founding principles of the NHS: that healthcare should be free to all at the point of use’ in 1951, when charges were introduced for false teeth and spectacles. However, we are still hanging on to this mantra seventy-five years later, and it has extended into many other walks of life.
In 1951, Clement Attlee chose common sense over Aneurin Bevan when he qualified the extent of universal free healthcare. It's now time to go much further in questioning the whole rationale of untargeted provision of free services for all, which have become so weighted in favour of older (and wealthier) generations.
It helps to look at the way that the private sector works in funding health services: in particular, that annual premiums don't stop at retirement — they continue for as long as that cover is required. National Insurance was supposed to be the equivalent ‘insurance’ for the public sector, covering both healthcare and pensions; however, N.I. payments (both employer and employee) end when people stop working, meaning that younger, working populations are the only source of funding for those post-retirement.
There are, of course, a raft of other generational unfairnesses: for example, the triple lock, and the unfunded nature of the state pension scheme. But surely the benefits of state support for older people should be targeted, not universal. A good first move would be to require people who can afford it to have mandatory private health insurance cover, which could be drawn down by the NHS as their services are used.
We set out these ideas for Keir Starmer on 10th June 2024, but no action was taken. Meanwhile, public finances are now moving steadily towards a bond market meltdown, and the move from universal to targeted support is urgently required.
Once this is tackled, I hope that Treasury ministers will think again about the hypothecation (ring-fencing) of inheritance tax receipts in order to provide disadvantaged young people with resources and life skills, thereby using the human life cycle to achieve inter-generational rebalancing. In the United Kingdom, this means supporting The Share Foundation's proposal for a Child Trust Fund Mark 2.
It's very important that the new team at the Treasury keep a long-term perspective in developing their plans for the future; in particular, that they should shift the burdens from young people in order to provide more encouragement for their future.
Student debt is, of course, in urgent need of review, but it's also important that the Child Trust Fund provision made for young people under the previous Blair-Brown Labour Government is delivered for the most disadvantaged young people. This means introducing automatic release at 21 for HMRC-allocated accounts, as we called for in Westminster on 15th July and which is supported by David Blunkett, Ruth Kelly and Bambos Charalambous, together with many other parliamentarians.
While more action is being taken by HM Treasury to communicate with unclaimed account owners, in The Share Foundation's view this will not solve the problem. Issues of literacy and unfamiliarity with savings will continue to stand in the way for those in the most need of receiving their money. Meanwhile, automatic release at 21 should be a ‘no-brainer’ for the Treasury, since there will be no impact on Government finances as a result of its introduction.
Finally, there needs to be a review of life skills training for each generation going forwards. As we commented on 3rd August, this should include older people entering retirement, whose calls on health services and social care could be significantly reduced by a structured training programme for keeping them active in both body and mind.
The Share Foundation has already built considerable experience in its ‘incentivised learning’ work for young people in care, with its Stepladder Plus programme for financial awareness, its Stepping Forward programme for building confidence and communication skills through the performing arts, and it is now exploring the scope for extending this work into tackling illiteracy, on which we commented on 10th August.
Finally, Share Radio has restructured its financial awareness course ‘Managing My Money’ so that anyone can have access to the audio podcasts and slides without the need for registration. We have temporarily discontinued the associated quizzes and third-party registration — which may be reintroduced later in the year — but, for the time being, please do make use of the programme.
In the meantime, let's hope that the new team at HM Treasury apply a new resolve to break the cycle of deprivation, together with seeking new ways forward in order to avoid the doom spiral of debt.
Gavin Oldham OBE
Share Radio