The Intergenerational Commission has published its final report and, according to the findings, young people have a pretty raw deal.
Young workers are forced to “shoulder huge risks” bearing the brunt of “insecure work”: their chances of building up a decent pension are slim, and their prospects of owning their own home one day are nothing but a pipe dream.
Their first assessment seems an opportunistic attack on gig economy jobs and zero hours contracts, which actually benefit a huge number of students and young workers who need or indeed enjoy the flexibility of being a Deliveroo driver while studying.
But the latter two points are legitimate, and the Resolution Foundation has done a good job of highlighting the problems all generations are facing, from house prices to how we support our ageing population. Unfortunately, their proposed remedy won’t cure the ailment.
Put simply, handouts don’t work and the proposal of a £10,000 gift to those aged 25 and under is, frankly, patronising.
Fundamentally, there is nothing progressive about cash transfers based on age rather than need. Such a policy would completely undermine the founding principle of the welfare state: that resources are redistributed to those who need it.
There are two questions that first come to mind when reading this “citizen’s inheritance” proposal. Why 25-year olds? And why £10,000? Both seem to be completely arbitrary. What about the 50-year-old who has been on the minimum wage their whole working life – no doubt they could do with a £10,000 top up more than the 26-year-old working in the City who is potentially already earning six figures.
And what difference is £10,000 actually going to make? The typical 20 per cent deposit needed for a house in London is now more than £80,000. And outside London you are looking at a lump sum of at least £20,000.
So in the grand scheme of things, this generous offering really isn’t that generous at all. And the proposal for how this will be funded – at a cost of roughly £8billion a year (allowing for variation in the number of 25-year-olds to be paid each year) – isn’t much better.
The suggestion is to replace inheritance tax with a new lifetime receipts tax. So instead of a blanket 40 per cent tax on inheritance above a £1million threshold, there will be a 20 per cent tax on all inheritance up to £500,000 and then 30 per cent tax above that figure. Not only does this make the system far more complicated than it needs to be, it also means that the 50-year-old on the minimum wage who has saved up, say, £50,000 for his children would now be taxed at a 20 per cent rate rather than zero. Hardly helpful for those who need it most.
Ultimately, this £10,000 gift is a bribe that will only act as a temporary sticking plaster for much more systemic problems. Addressing the costs of living head on would be much more helpful and beneficial to all generations, not just the young.
If you think home ownership is unreachable for young people, relax the planning system to allow more houses to be built in areas people need them. Properly liberalise the energy sector to bring energy prices down as low as they were in the 1990s. Consider letting young people keep more of their own money by taxing them less.
Taking them out of National Insurance, for example, would provide some relief and could be levelled in conjunction with scrapping the unsustainable triple lock on pensions.
There a multitude of better options and while the Commission recognises other solutions, they’re not onto a winner with this arbitrary handout.
In the context of this proposal I think it is also worth highlighting that while young people do certainly face challenges, the “raw deal” they supposedly have compared with that of previous generations is massively overstated.
It’s a complete myth that young people are paid less than their parents or their grandparents. The total lifetime incomes are much higher today for 25-year-olds than for 65-year-olds, not to mention living standards being vastly improved.
Sometimes it is easy to forget that the baby boomers and those before them did not exactly have an easy time of it. When my grandparents were my age they had ration books, allowing them only six rashers of bacon per household, per week, and half a packet of cheese per week. These days, we don’t have a ration book so much as a whole encyclopaedia of food options at our fingertips. We can browse for what we want online, and at the click of a button have any number of the world’s delicacies delivered to our door, all at a very reasonable price.
Although this may be a unfair comparison given we are not (thankfully) living through a world war, it does illustrate how skewed the narrative has become about how hard done by younger generations are.
Yes, the Government needs to address the cost of living crisis, but not just for the young and certainly not by providing patronising handouts that will ultimately do very little to address the systemic problems we face.