The triple lock is a symbol of a society that has stolen the young’s future

We used to think that old people were poor and poor people were old. That belief still lingers and is why there is such support for the triple lock, which puts up pensions by inflation, earnings or 2.5% whichever is higher. But pensioners are better off than ever. Indeed, our research at Resolution Foundation shows that, after allowing for household size and for housing costs, the typical pensioner is now as well off as the typical working age family. And the poorest 10% of pensioners are better off than the poorest 10% of families too.

Meanwhile the heaviest financial pressures are on young people and families. There are several forces at work. One is housing costs. The proportion of people in their thirties living in privately rented accommodation has gone from 10% at the turn of the Millenium to almost 30% now. Over 20% of children are being raised in privately rented accommodation. Private renting is also the most expensive housing tenure. In 2023-24, private renters spent, on average, 35% of their net income on housing costs. Buying your own home makes a lot of sense. Mortgagors spend 10 percentage points less of their net income on housing than private renters, or 22 points less if you strip out the principal repayment. But it is hard to get started on the ladder without a deposit and house prices are so high that getting a 5% deposit is a real barrier. Three-quarters of today’s pensioners are homeowners: it is hard to see how younger people are going to reach anything like that level of home ownership. Margaret Thatcher delivered boosted home ownership by council house sales: we need a similar boost now through tackling today’s problems – help with deposits is probably the most effective route.

It is right to save money on the benefits bill but the cuts over the past few years and proposed ones for the future will predominantly impact working age families. Child benefit is a basic benefit to help most families with the cost of children who are, after all, our future. It has been frozen in cash terms in seven of the fifteen years since the introduction of the pension triple lock and in several other years its increase has been held to 1%. All this means that the net impact of changes in benefits from 2010-2024 was a cut in the real-terms value of benefits for young people and families by £1,400 but an increase in benefits for pensioners by £900 on top of inflation.

Keeping the triple lock whilst cutting the value of benefits for younger people exacerbates this trend. To maintain support for cuts in benefits there has to be a sense that the burden is being shared fairly. Offering the older generation extraordinary increases in the value of their benefits whilst cutting them for the next generation is hard to defend. Older Tory voters will find it increasingly uncomfortable to take the high ground of shrinking the state but only on the condition that their state is delivering pensions and free health care untouched.

The older generation, the post-War baby boom, were in work during the 1980s and 1990s when taxes were being cut. That was when they were happy to see public spending controlled by linking the State Pension to prices alone whilst child benefit went up and there were new in-work benefits. Now that big generation are growing older, they are using their political power to change the pension system, so it is more generous than the one before they were pensioners. This brings them benefits far greater than they were willing to fund for the older generations ahead of them. And they may also back cuts in benefits for the generations coming after them. So, this big baby boomer generation want to go through life with a tax and benefit system that is always organised around their generational interest. That is what I warned about in my book The Pinch.

Pensioners say that they have contributed and are entitled to big increases in benefits. But the contributory condition has been weakened over the years. Moreover, all the taxes and National Insurance they have paid over their working lives are worth far less than the value of the benefits they are taking out. If there were strict contributory principles, benefits would be far lower. For the next generation the calculations look very different: they could end up contributing more than they take out. The baby boomers and generation X are expected to gain the most from the welfare state. Someone born in 1956 is expected to withdraw over 30% more than they contributed; someone born in 1996 less than 15%.  

The benefits bill is too high. Public borrowing is too high. When Margaret Thatcher left office in 1990 the National Debt was down to almost 20% of GDP whereas now it is in danger of hitting 100%. That imposes borrowing costs that are going to be paid for by the younger generation for decades to come.

Also, the post-Cold War peace dividend is now over: we need to spend more on defence. The OBR estimate that the triple lock will soon be costing higher than £15 billion a year which is more than a straightforward link to earnings. That is also more than the cost of getting defence spending to 3% of GDP.

Tackling these national challenges can’t be done just by imposing all the costs on the younger generation. Many older people themselves worry about the prospects of the younger generation. There has to be a clear shift of resources to the younger generation to help get them started on the housing ladder and to provide the training and support to cut the number of NEETs. That is what investing in the future is all about.

This article was originally published in The Telegraph.