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1 September 2016

The baby boomers’ last laugh? Why young Britain is losing out

The political gulf between the generations is growing. Could Brexit be the final nail in the coffin?

By Tim Wigmore

“Is anyone actually voting Out?” a friend posted on Facebook the day before the EU referendum in June. He is 25 and spoke for many people my age, especially those of us who live in or close to London. We soon knew the answer: by a majority of 1.3 million, the UK had chosen to leave the EU.

Voting in the referendum exposed many chasms in the UK: graduates v non-graduates; urban v rural; even Judaeo-Christians v those of other religious faiths. But perhaps none was starker than that between the generations. Three-quarters of people under the age of 25 voted to stay in the EU, but two-thirds of those over 65 opted to leave.

In British politics today, OAPs invariably get their way. Baby boomers – the cohort born in the years immediately after the Second World War – are surely the most fortunate generation in history. They were the generation of the welfare state and the housing boom; they paid no tuition fees; and many benefited from an economy with “more room at the top” for skilled workers.

They were the last generation to enjoy something close to job security. Homeowners benefited from inflation. Since 1980, the average cost of a house has risen from £22,676 to £198,564: an increase of more than 100 per cent in real terms. Three-quarters of the over-65s own their home, up from half 35 years ago.

In 2010, the “triple lock” on pensions was introduced, guaranteeing that pensions, including those for roughly two million people living in the so-called millionaire households, would rise in line with whichever was the highest: price inflation, earnings growth, or 2.5 per cent every year. Since then, the basic state pension has risen by four times as much as average earnings in Britain have done. Today, more than 600,000 people under the age of 25 are unemployed and the poorest students graduate with debts in excess of £50,000.

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There are also considerable pensioner benefits that are not means-tested. Is it fair that the government should dish out winter fuel allowances and free bus passes to all the over-65s, as well as free television licences for all over-75s? In my view, it is not.

The largesse has come at a price for the rest of us. The average retired household is £2,000 better off than in 2006, but the average working household is £1,000 worse off. Between 1979 and 2010, the average disposable income of those aged over 65 in the UK rose by two-thirds, while it fell for those between 25 and 29.

“Generation Rent” is a moniker that conceals a bleak truth: the number of those aged between 20 and 34 living with their parents has risen by a quarter to 3.3 million since 1996, because of the increasing costs of buying or renting even the smallest flat. The average low-to-middle-income household needed three years to save for a typical first-time buyer deposit in 1983; today, it requires 24 years.

The old have become the most effective lobbying group in politics. Because their share of the population is rising, their power grows. By 2030, over-60s will make up a third of the population, compared to a fifth in 1971. To their credit, older people are more likely to vote. In the 2015 general election, 78 per cent of the over-65s voted, but only 43 per cent of under-25s did so.

The vote for Brexit was “the final nail in the coffin for intergenerational fairness”, says Ashley Seager, a co-founder of the Intergenerational Foundation. “Older generations . . . have now locked the younger generation out of the European Union, against their will.”

As Britain lets in fewer immigrants – who contribute more to the economy than they receive – more will be demanded of young people. By 2050 Britain will have to spend £80bn more each year than it does now on pensions, elderly care and the NHS. As if that were not enough, young people face losing the freedom to study and work elsewhere in Europe.

Edmund Burke described the idea of an intergenerational contract as “a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born”. This contract has been broken. Over their lifetime, those
who are now aged between 60 and 75 will receive, on average, £200,000 more from the state than they put in. Those of us in our twenties will contribute £100,000 more than we take out.

The Brexit vote could be called the baby boomers’ last laugh: the parting shot of a generation that has enjoyed unprecedented largesse from the state and then bequeathed debt, unemployment and political instability to their grandchildren. 

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This article appears in the 31 Aug 2016 issue of the New Statesman, Syria's world war