Society needs to have a more honest discussion about intergenerational fairness and the burdens being placed on the young, says Angus Hanton
An intergenerationally fair society balances the interests of different generations, both today and for the future. Future governments should not be hamstrung by the need to cover today’s spending decisions. When spending is ramped up, such as during the COVID-19 pandemic, it becomes more urgent to reach agreement on how to ensure intergenerational fairness and financial sustainability going forward.
The pre-COVID-19 situation
Even before COVID-19, younger generations were losing out when it came to government spending and benefit decisions. Intergenerational Foundation research has revealed that, during the 19 years to 2019, the gap between the amount the government spent on older people and the amount spent on younger generations doubled (bit.ly/IF_AgeBias). Pensioner poverty halved to around 1.9 million pensioners, or 15%, while the number of children living in poverty reached around 4.2 million, or 30%. According to former Children’s Commissioner Anne Longfield, we are on track to having the highest levels of child poverty since records began in the 1980s.
During the past decade, the position of younger generations stagnated or declined in most policy areas, while the wealth gap between the oldest and youngest age groups grew by more than 40% in the past six years alone (bit.ly/IF_LeftBehind). At the same time, the government has been spending £20bn every year on interest for public sector pension debt, and this figure is set to soar as the debt burden and interest rates rise.
Much of the change in spending – which has involved withholding large parts of the welfare safety net, such as travel concessions and housing benefit, from younger generations – is due to the rapid ageing of society. State pension spending rose from around £40bn in 2010 to around £100bn in 2020 due to increased numbers of pensioners and government promises to maintain the state pension ‘triple lock’, which raises state pension’s value every new tax year by inflation, average wage growth or 2.5% – whichever is highest.
It is clear that older generations did not contribute enough in taxes and National Insurance during their working lives to cover the cost of their growing longevity. Furthermore, while people are living longer, they are often doing so with chronic conditions, thus increasing spending on health and social care. And at the same time, older generations are the wealthiest ever, having enjoyed the last final salary pensions and the unprecedented rise in property values.
The Intergenerational Foundation argues that, on both intergenerational fairness and intergenerational financial sustainability grounds, older generations should contribute more to cover the costs of their increasing longevity, rather than already overburdened younger generations. Unfortunately, recent governments have preferred to impose new tax burdens onto young people (bit.ly/IF_PackhorseGen).
“Using the lens of intergenerational fairness, we can have a more honest discussion”
The UK has so far borrowed close to half a trillion pounds, on top of day-to-day spending, to combat COVID-19 – equal to around four years of NHS funding, or about £10,000 for each UK household. The UK’s national debt was an eye-watering £2.2trn, running at 104% of GDP, by the end of March 2021 according to the Office for Budget Responsibility, and that does not account for spending through to 2022. The cost of this will be passed onto younger and future generations, worsening intergenerational fairness today and intergenerational financial sustainability in the future.
Calls to turn off spending are interpreted as ‘right wing’ and neoliberal, calls to borrow and spend more as ‘left wing’ and irresponsible. Using the lens of intergenerational fairness, we can circumvent party politics and have a more honest discussion about how to balance the interests of different generations. By introducing intergenerational fairness impact assessments as outlined in the Wellbeing of Future Generations Bill, currently making its way through Parliament, today’s policymakers could help to ensure that future generations are not overburdened.
Angus Hanton is co-founder of the Intergenerational Foundation.