A new generational contract is needed to tackle the big challenges Britain faces for young and old, covering a better funded NHS and care system, a radically reformed housing market, and a new citizen’s inheritance to boost the prospects of younger generations. This is according to the final report of the Intergenerational Commission published today (Tuesday).
Over the last two years and via 22 reports, the Intergenerational Commission – chaired by Lord Willetts and including TUC General Secretary Frances O’Grady and CBI Director-General Carolyn Fairbairn – has investigated the stresses and strains on Britain’s contract between generations, and what can be done to renew it.
The generational contract reflects the fact that we judge the success of a society by how it treats its old, and believe strongly that each generation should have a better life than the one before.
However, the Commission warns that the public are increasingly questioning whether Britain is offering young people the prospects previous generations have enjoyed. This is not just confined to younger generations either, with healthcare now the most pressing area of worry for British adults.
The Commission finds that much of this pessimism is borne out by the evidence it has uncovered:
Income and wealth progress for young adults has stalled
- New analysis shows that the disposable incomes of millennials at age 30 are no higher than the generation before them (generation X) at that age – despite the economy growing by 14 per cent over the last 15 years. In contrast, the incomes of baby boomers at age 30 were more than one third higher than the generation before them.
- Millennials are half as likely as the baby boomers were to own their own home by 30, and are four times as likely to rent in the private sector.
Millennials are being held back because they are bearing far more risk at work and at home
- Millennials in their 20s are more likely to be in insecure work, are 25 per cent less likely to have moved jobs than generation X were at the same age, and are missing out on big pay rises as a result.
- The number of families bringing up children in the private rented sector has trebled in the last 15 years, to 1.8 million.
We risk not providing older generations with the health and care they deserve
- State spending on health, care and social security is set to increase by £24bn by 2030, and by £63bn by 2040. This increase needs to be funded in a way that is fair to all generations.
However, while Britain’s contract between generations is under severe strain, the Commission argues that it can be repaired. Indeed, families are already doing this, with the number of adults caring for elderly relatives up 11 per cent since 2001 and the ‘Bank of Mum and Dad’ helping up to half of all first-time buyers in recent years.
The Commission says that the state now has to rise to this challenge, and sets out a radical blueprint of over 35 recommendations to build a new generational contract, including: Giving older generations the health and care they deserve, need and expect
- The Commission proposes a £2.3bn NHS levy to put it on a firmer financial footing. This would be funded by applying National Insurance Contributions to pensioners’ earnings and, at a lower rate, to the income of richer pensioners, rather than raising NICs for working age people.
- Rescuing our social care disaster with a £2.3bn funding boost from replacing council tax with a progressive property tax, including deferred payments for asset-rich, income-poor families. A new model for care provision should also ask those able to contribute towards their care to do so, but subject to strict limits.
Deliver big changes to make Britain work better for young people
- The Commission proposes halving stamp duty for first-time buyers and movers, but not those owning multiple properties (at a cost of £2.7bn), and offering a time limited capital gains tax cut for selling properties onto first-time buyers. This would put first-time buyers in a far stronger position in the housing market.
- Introducing indeterminate tenancies and three year light touch rent stabilisation, so renters can put down roots. Giving zero hour contract workers the right to a regular contract, and shift workers greater notice of when they are working, would also help reduce the risks that young people bear.
- A restricted use ‘Citizen’s Inheritance’ payment of £10,000 for all 25 year olds would provide up to half of a deposit for a typical property outside London, or vital capital to start a new business, demonstrating that Britain has something to offer young people whatever their background. This would be funded by replacing inheritance tax with a new lifetime receipts tax that tackles widespread avoidance, levies the tax on recipients not estates and entails lower tax rates for all.
David Willetts, Executive Chair of the Resolution Foundation, said:
“Britain’s contract between generations lies at the heart of society. As families we provide for our children and parents at different times. We expect the state to support these natural instincts – but too often it is tilted in the opposite direction.
“Many people no longer believe that Britain is delivering on its obligations to young and old. But our Commission shows how Britain can rise to this challenge.
“From an NHS levy to put healthcare on a firmer financial footing, to building more homes and a Citizen’s Inheritance to boost young people’s career and housing aspirations, our report shows how a new contract between generations can build a better and more unified Britain.”
Frances O’Grady, TUC General Secretary said:
“Today’s young workers shoulder huge risks. They’re bearing the brunt of the rise in insecure work. And many have little prospect of a decent home or a decent pension.
“To fix these problems we need an economy that works for all people – millennials and baby boomers alike. That means building more houses, giving everyone a decent retirement, and crucially stronger unions and rights at work.”
Carolyn Fairbairn, CBI Director-General said:
“The idea that each generation should have a better life than the previous one is central to the pursuit of economic growth. The fact that it has broken down for young people should therefore concern us all.
“We need individuals, businesses and the state to pull together to address this challenge, and lift the living standards of young and future generations.”