The tax and benefit policies of the two main parties risk further straining the contract between generations by hitting younger working age families more than older generations, new analysis of the parties’ manifestos by the Resolution Foundation published today (Thursday) has found.
Fairness between generations has emerged as a strong theme across both manifestos. The Conservative manifesto identifies repairing the intergenerational contract that underpins society as one of the country’s five giant challenges, and Jeremy Corbyn’s plan to build a Britain that ‘works for the many, not the few’ has a strong intergenerational flavour.
However, when it comes to the parties’ tax and benefit plans, the Foundation notes that both parties’ proposals put the main burden of revenue raising on younger working age, rather than older, generations.
The 2017 Conservative manifesto included signs that the party wants to spread revenue raising measures more evenly across generations with plans to means test Winter Fuel Payments and loosen the lock on state pension uprating. However, Resolution Foundation analysis finds that these policies are dwarfed by plans to continue with benefit cuts announced in 2015, three-quarters of which are still to come. Families with young children will be hit disproportionately hard by these cuts.
Taken together the overall Conservative tax and benefit plans imply a reduction in the annual incomes of millennials of £475 on average (a fall of 1.3 per cent in their annual net income), compared to £390 for generation X (a 0.9 per cent drop) and £120 for baby boomers (a 0.4 per cent drop).
The Labour manifesto commits £2 billion to reviewing cuts to Universal Credit, which reduces the scale of benefit losses to working families to a limited extent. The party is opposing all Conservative plans to end the pensions triple lock and restrict Winter Fuel Payments. On the revenue raising side, its plans to increase income tax for those earning more than £80,000, raising £6.4bn overall, are spread across the age distribution, but hit those in their 50s the hardest.
The Foundation analysis shows that Labour’s plans mean the greatest income reduction is for the generation X-ers – with an average annual reduction of £760 in 2022 (a fall of 1.7 per cent in their annual net income), compared to £580 for millennials (a 1.6 per cent drop) and £195 for baby boomers (a 0.6 per cent drop).
This means that Labour will reduce millennials’ incomes by more, on average, than the Conservative offer. However, the Foundation notes that this is because Labour plans to raise more through tax rises to increase public spending. In terms of the proportion of tax and benefit takeaways, the Conservatives lean slightly more heavily on millennials than Labour plans to (48 per cent of net income reductions fall on them under the Conservatives, compared to 43 per cent under Labour).
The Foundation says that beyond tax and benefit shifts the main parties’ manifesto pledges to different generations vary significantly.
For example, Labour’s pledge to remove tuition fees – its single biggest spending commitment at £11.2bn – will overwhelmingly benefit higher earning members of younger generations, particularly later on in their careers when they would be making significant student loan repayments under the current system. The Conservatives’ planned changes to how individuals fund their care needs will have big implications for older people by asking them to contribute more from accumulated housing wealth.
The Foundation welcomes the strong commitments both parties have made on housebuilding and vocational education that will be welcomed by many in younger generations.
Laura Gardiner, Senior Policy Analyst at the Resolution Foundation, said:
“This election has marked a sea change in the willingness of both main parties to recognise questions of fairness between generations – something that was notably lacking in previous elections.
“However, despite welcome commitments from the parties on key intergenerational issues of housing and vocational education, younger generations remain the big losers when it comes to tax and benefit changes planned. Millennials face significant income losses, whichever party wins the election. Under both parties, millennials are set to face losses of around £500 a year by the end of the parliament, largely as a result of continuing to roll out George Osborne’s benefit cuts.
“Younger voters will be encouraged that their interests have at last made an appearance in the political debate, but disappointed that they still look set to bear the biggest burden in the years ahead. It is it is imperative that whoever takes power next month thinks again about how it supports working families.”
Notes to Editors
Embargoed copies of the Resolution Foundation’s analysis are available from the press office.
The analysis takes into account the impact of the main parties’ tax and benefit policies across the age distribution, relative to policy in place today (and so not including in the baseline planned benefit and tax cuts that haven’t yet been implemented).
Millennials will be aged 22-41 in 2022, generation X will be 43-56 in 2022 and baby boomers will be 57-76 in 2022.