11 December 2019

Free Exchange: David Willetts on how the Baby Boomers took their children’s future

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Lord David Willetts has been an intellectual titan on the centre right for the past 30 years. Having worked in Margaret Thatcher’s policy unit, Willetts was an MP between 1992 and 2015, and served as a Cabinet Minister in the coalition government. He is President of the independent think-tank the Resolution Foundation, and the author of a number of books, including The Pinch: How the Baby Boomers took their children’s future – and why they should give it back.

The book caused quite a stir on publication in 2010, and its thesis has proved remarkably prescient in the years since. So to mark the release of the second edition, our Deputy Editor Frank Lawton sat down with him to discuss the broken social contract and how to fix it.

Frank began by asking David when – as a Baby Boomer himself – he first realised he was to blame for everything.

David Willetts on…the Baby Boomers

Being a big generation worked to the Baby Boomers advantage. We are shaping the marketplace because we’re all consumers – that’s why the Rolling Stones are still on tour – and we’re also a big voting bloc, so we could shape politics in our interest.

We weren’t thinking of the long term impact of a lot of the decisions we were taking, including turning up but protest meetings to object to new houses being built.

on…Homeownership

Homeownership rates amongst people aged 25-34 peaked at 50% at the end of Margaret Thatcher’s time in office in the late 1980s. It’s now down to 25%.

on… how our economy has changed since Thatcher

The most fundamental change in our economy has been the rise in the value of wealth relative to our national income and GDP. Wealth used to be about three times national income. It’s now about seven times national income.

Building up wealth from your work, from your earnings, has got much harder, and the point at which that gets real is when someone tries to save up for a deposit for a house out of their income – this has made inheritance ever more more important.

I did not expect when we were going through the Thatcherite revolution to end up in a world where returns from work had fallen, and returns from inheritance had increased – that is not my picture of a mobile society. And what it means in the long term for politics is that we’ll have a blocked society where increasingly inheriting from your parents will matter more, where working hard will be less well rewarded, because it isn’t of itself a basis for getting into home ownership or building up a decent pension. And in the long run, it will mean young people don’t feel they’ve got a stake in our economy. And the whole point of the property owning democracy is for everybody to have a stake.

There’s no country that’s gone so rapidly from very high levels of home ownership to low levels of home ownership. There are some low home ownership countries, but very few have seen the steep decline we’ve had.

The British state has quite an unusual shape compared with other OECD countries. We are a great big state on those services for older people, and we’re rather a puny state for many other things.

on…the dilemma facing the Conservative Party

We’ve had a different approach from recent conservatives to the balance of funding between young and old than the one we used to have. And that is reflected in a shift in the balance of support for the Conservative Party…we mustn’t become the party of possession and not of opportunity.

The pressure on public spending is going to grow, basically in order to provide public expenditure to look after Tory voting older people. Who are we expecting actually to pay for it? Surely not these younger workers who are currently gettomh a raw deal compared to us Baby boomers?

on…the younger generation

Both on the income side and on the asset side, the younger generation are getting a raw deal.

The growth in pay in the last 10 or 15 years has been incredibly modest, which means that a 30 year old now is earning no more than a 30 year old 10 or 15 years ago, and incomes after housing costs have been badly hit. And if you actually look at what’s happening to consumption, where the consumption power is, you find that consumption amongst older people is rising; if anything amongst younger people, it’s falling.

on…the coming pinch

Both Britain and the world faces some pinch points towards the middle of the century: they’ll be around climate change, access to water around the world, and the mass movements of migrants, particularly from Africa, which will be very heavily affected by desertification.

The challenges facing Britain and the world over the next decade or two are severe.

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Frank Lawton is Deputy Editor of CapX