At certain points in the political cycle, who wins and loses at Budget time is viewed fairly cynically, with the government presumed to be focused only on vote-maximisation. But with the prospect of an early election kicked into the long grass, the Chancellor Phillip Hammond’s second fiscal statement this week should instead be revealing of just where the government’s priorities for this Parliament lie.
These priorities are usually assessed in terms of their impact on specific groups – business sector x, family type y, and so on. But what if we step back and look at the broad priorities of different generations? The rising salience of this question at Budgets and beyond reflects an intergenerational social contract under strain. This matters to all of us given how we live our lives within families. This is the issue the Resolution Foundation’s Intergenerational Commission is currently exploring.
With this in mind, here’s our take on what members of the three largest generations – the millennials, Generation X and the baby boomers – might be listening out for from both the Treasury and the Office for Budget Responsibility (OBR) on Wednesday.
The baby boomers (born 1946-1965)
Baby boomers are currently in the final phase of their careers. or have recently retired. On the policy side, some will be tuned in to any noises on pensioner benefits, though that’s unlikely to come up at this Budget. Instead, the most pressing Budget issue for this generation is social care, both as caregivers to partners and parents, and increasingly as recipients of care. Even those baby boomers who’ve done quite well risk having their lifetime savings wiped out by care costs. For rich and poor, the system is creaking, with the inadequacy of funding laid bare by the levels of unmet need. Short-term cash for councils in the Budget is essential, with any signals as to the longer-term solution providing more reassurance.
On the economy side, one of the biggest boons for baby boomers in recent years has been our record employment performance. Three-quarters of employment growth since the millennium has been among the over-50s. But there is still a huge employment gap for older workers, so the OBR’s assessment of how much our jobs market can continue to grow will indicate the extent to which this gift can keep on giving.
Generation X (born 1966-1980)
We turn next to Generation X, born between 1966 and 1980, and therefore at the peak of their careers and most likely to be bringing up families. On the policy side, Generation X is the group most affected by the classic giveaways and takeaways of recent Budgets and Autumn Statements – income tax cuts have benefited higher earners most, while cuts to working-age welfare have hit families on lower incomes. So, depending on which end of the income scale individuals are at, any giveaways in one or other of these areas will be welcomed.
On the economy side, modest-income members of Generation X with families will be most sensitive to the OBR’s outlook for inflation. This is because the value of in- and out-of-work benefits is frozen in cash terms over the Parliament. Every acceleration in inflation means a real income reduction for those in receipt. And given they’re in their peak earnings phase, the extent to which inflation eats into earnings will matter more widely across Generation X too.
Millennials (born 1981-2000)
Finally we consider the millennials, born between 1981 and 2000 and so currently finishing education, beginning careers and making their way in the world. The biggest issue for this younger generation is housing, with far fewer than in preceding generations becoming homeowners and many on insecure private-rented contracts as a result. Following last month’s Housing white paper, millennials will be looking to the Chancellor to put the government’s commitment to get homes built faster into action.
On the economy side, the biggest question for millennials will be whether the OBR’s judgement of our long-term productivity prospects has changed, following downward revisions at past fiscal events. Granted, Britain’s productive capacity is hardly a burning topic for most young people, but it really matters as it’s the main driver of their long-term pay prospects. Resolution Foundation research has shown that millennials’ earnings are no higher than the earnings of those the same age 15 years before – a stark break from the progress of the 20th Century. Getting back to or exceeding our pre-downturn productivity path is key to ensuring that we return to an economy where the lifetime earnings of each generation significantly exceed those of their predecessors.
Of course, people don’t limit their concerns to things that directly affect their generation. You don’t have to be 70 to want further funding for social care, and it’s not just millennials who worry about the seemingly-impossible task of owning their own home.
Such common understanding of the issues we face is one of the reasons why, as the Prime Minister has set out, renewing the intergenerational contract is a key task for those shaping the politics and economics of post-Brexit Britain. Wednesday’s update from the Chancellor will give us the latest picture on both fronts.
Laura Gardiner is a Senior Research and Policy Analyst at the Resolution Foundation.