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31 July 2020

The oldest millennials may soon stump up for social care. The oldest boomers won’t

The government just might apply the political logic of the triple lock pension to the UK’s underfunded social care system. 

By Jonn Elledge

Because I know how to have fun, there’s a recurring argument I like to have about pensions. In 2010, as part of the coalition agreement between the Conservatives and Liberal Democrats, David Cameron’s government introduced the “triple lock”, a guarantee that state pensions would rise each year to match whichever was greatest: wage growth, price increases or 2.5 per cent. 

The long-term result of this policy will be that the state pension won’t just keep up with wages, but will actually improve relative to them. (This is from, let’s be clear about it, a not massively generous starting point. Still, every little helps.) That recurring argument which I so enjoy relates to a question. Is the triple lock, as some would have it, a universal benefit? Or is it better understood as yet another transfer to the most affluent generation of pensioners this country has ever seen?

In theory it’s the former – none of us is getting any younger, so better pensions should ultimately help almost all of us. In practice, though, I fear it’s the latter, because I simply don’t believe it will last long enough for anyone born after about, say, 1970 to actually benefit. The reason the baby boomers have been pandered to, while previous generations of pensioners were not, is not because of any sudden national sense that we should value our elders more. It’s just that there’s a lot of them, and they vote. If you honestly believe the triple lock will survive the arrival of a less numerous generation of pensioners, then I have a bridge to sell you.

Questions of ageing, money and political clout have been much on my mind this week because of another story about a completely different bit of the welfare system. On Sunday night, the Guardian reported that ministers had finally come up with a plan to fix Britain’s underfunded social care system: make everyone over 40 put their hand in their pockets.

The plan, inspired by similar policies in Germany and Japan, would require the middle aged either to pay more tax or National Insurance, or force them to purchase actual insurance. Either way, it would ensure cash to pay for residential care bills, which can run into four figures every week. And it would do so without forcing the elderly to sell their homes, which, Britain being Britain, is verboten.

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Reports that such a plan was on the table were swiftly dismissed by Downing Street. But that doesn’t mean as much as it once did. Health Secretary Matt Hancock is reported to be in favour, and there are, anyway, a limited pool of options for plugging a funding gap that is now estimated to be of the order of £3bn a year. That Guardian report has the air of a kite-flying exercise, intended to see how the public reacts to a controversial policy. And there is a logic to making older, more financially established people pool their risk to fund the life-ruining care fees that some of them will face in their dotage, rather than loading yet more pressure onto the young.

On the other hand, I’m about to turn 40. Now is when this country decides that middle-aged people aren’t pulling their weight? Now?

Something of this sort is probably inevitable: any plan that doesn’t include my demographic almost certainly won’t be broad enough to plug the gap. But as with the triple lock, it’s interesting to note who sees the benefits and who is expected to pay. Those of us born in the early 1980s have had it a hell of a lot easier than those who came later; but we were still expected to pay tuition fees, graduated into a world in which housing costs had started to go nuts and faced a world-changing economic depression before we hit 30. Now, probably, we’ll be stumping up for this, too.

The boomers, by contrast, have had free degrees, affordable housing, and, in their youth at least, a welfare system that didn’t obviously want them dead. Yet if this plan trailed in the Guardian goes ahead, many of them look set to escape contributing to their own social care costs, by virtue of having retired before the tax rise intended to pay for it comes into effect. It is probably not a coincidence that there are more of them than there are of us. 

You can’t charge income tax on people who no longer have any income, of course, but a government that wanted to ensure intergenerational equity here does have another option. It could find more creative ways to unlock some of the over £4 trillion locked up in housing wealth. It’d be relatively easy to ensure a property tax was progressive, in the sense that those who had most would pay more. But such a policy would also be progressive in that it would claw-back a share of the unearned wealth funded largely by younger, poorer home-buyers.

And yet, as noted, such an idea is clearly off limits. Partly because it’d be an administrative nightmare; partly because houses are homes as well as assets, and so many people bristle at the idea of taxing them; and partly because, besides all those old people sitting on unearned housing wealth, we have a plenty of younger ones whose entire financial plan is “inherit the family house”, and they won’t like this either.

I can’t help but think that a large chunk of it is explained by the same, basic political logic as that triple lock. There are a lot of those guys – and they vote.