When David Willetts wrote the first edition of The Pinch: How the Baby Boomers Took Their Children’s Future – And Why They Should Give It Back in 2010, he intended it as a warning to policymakers, “not a training manual”.
Almost a decade later, when the former universities minister came to update the book, he found that the trends he had identified as concentrating wealth in the pockets of the older generations had significantly worsened. A combination of factors, including rising house prices and generous pension schemes, had resulted in the baby boomer generation (those born between 1946 and 1965) enjoying over 25 times the wealth owned by the millennial cohort (1981-96).
“On assets, it’s still very hard for young people to build up the two main assets that my generation – the boomer generation – built up,” says Willetts, now a Conservative life peer and president of the Intergenerational Centre at the Resolution Foundation think tank. “Getting started on the housing ladder is incredibly difficult. We’re talking about 25 per cent of young people being owner occupiers, against a peak of 50 per cent of young people being owner occupiers in the late Eighties and early Nineties.”
On retirement savings, meanwhile, the defined-benefit pensions that were common pre-2000, and which have shot up in value as life expectancy has increased, are disappearing, leaving younger people with far less generous defined-contribution schemes, if indeed they are able to save at all.
It is not news that it is increasingly difficult for young people to buy homes, nor that pension schemes for older cohorts were far more lavish. But for years, the political will to level the playing field and redistribute wealth along generational lines has been virtually non-existent. The narrative persists that young people struggle financially because they are frivolous and feckless, spending their money on avocado toast instead of saving.
It doesn’t matter that, as Willetts points out, consumption among younger people has been falling, or that incomes have stagnated while household wealth has grown rapidly among those lucky enough to own assets, or that pensioner household net income after housing costs overtook that of working households back in 2009. It doesn’t matter that, over a lifetime, people born in 1956 will each receive on average £291,000 more from the welfare state than they paid in, compared to £132,000 for people born in 1996. Tweaking pensioner benefits or tapping into the property wealth accumulated by the boomers have been no-go areas for anyone wanting to build a career in politics.
Until now. For, in the midst of a perfect storm of rising youth unemployment and surging national debt, the man who has made generational fairness his mission is surprisingly optimistic about the potential for change.
Covid-19 may be a disease more dangerous to the old, but the economic impact has fallen on the young. “Most of the trends have if anything been exacerbated by the virus,” Willetts tells me. “Just in terms of the work they do, it so happens that young people are concentrated in the high social-contact sectors which have been most hit by the virus – hospitality, retail. So in terms of the jobs market, they are most likely to have lost their jobs.”
Lockdown has also highlighted the stark divide in living conditions. The insecure rental accommodation occupied by the majority of under-35s unable to get on the housing ladder, often shared with others and offering little personal space, let alone gardens, has made lockdown an unrelentingly grim experience. “When you add in mental health, and the strain of handling the crisis, it looks as if younger age groups have been particularly vulnerable,” Willetts warns. He suggests that lack of space has played a big part in the sharp shock to young people’s mental well-being – people aged 16-24 have had on average half the living space of over-65s during lockdown.
The upside to this depressing situation is that the plight of young people can no longer be ignored – either by their parents and grandparents, or by politicians.
“Politicians in elected office aren’t kamikaze pilots,” Willetts tells me, reflecting on how Covid-19 could prove a catalyst for change that has so far been slow and incremental.
“When I talk to my friends who are still in government, compared to ten years ago we have made massive progress in persuading people there really is a problem. The idea that the younger generation are getting a raw deal – it’s harder for them to get started on the housing ladder, their wages are not rising – that has come from a rather quirky, controversial idea to being widely accepted.”
Once we admit there’s a problem, Willetts is ready with a host of solutions. On the spend side, his priorities are more mass housebuilding (homeowners are realising that a lack of local development is preventing their children from buying homes) and greater investment in skills and education to make up for the past year. He also wants to maximise auto-enrolment to help young people build up pensions.
In terms of how to pay for it all, Willetts has strong feelings about the triple lock, which through a quirk of calculation means the state pension could rise by three times more than earnings in the next two years.
“I personally think the triple lock has come to the end of its life,” he says, with a frankness that would likely horrify his Conservative colleagues. “The triple lock should not be repeated – you should have some gradual long-term link to earnings, and if resources are available they need to go to families and things like maintaining the help through Universal Credit.”
It is notable that even Labour has not dared to suggest tinkering with the triple lock, despite the blatant double standard it creates. (As Willetts notes: “Over the last five years, pensioner benefits have increased by £200 on top of inflation, and family benefits – before the emergency Universal Credit increase – have risen by £200 less than inflation.”)
Labour would likely prefer to eschew the generational argument and push for a one-off wealth tax to manage the UK’s £2.1trn national debt, a move which its advocates estimate could raise £260bn. But Willetts is dismissive.
“Wealth comes in many forms and actually it’s quite hard to get at it when it’s not moving around. But you could certainly do things like reform capital gains tax so there are fewer exemptions and perhaps increase the rate… You could reform council tax, which is very regressive and collects proportionally much more from people in low-value properties than high-value properties.
“So I think there are a range of different things you could do that would add up to a fairer way of collecting some necessary contributions from people with property, rather than a single all-singing, all-dancing wealth tax.”
His other big suggestion is likely to be equally unpopular among both main parties: namely, compelling those with assets to tap into their property wealth to pay for their social care.
“Look, I’m a Tory,” he says. “I don’t like putting up taxes, I’d prefer not to have to. But it does mean that if it is necessary to find extra revenues for public services or to fund social care, I think it’s reasonable to look at ways you can expect property to make a contribution.
“In the last 30-40 years the value of assets – the value of wealth – has risen from about three times GDP to about seven times GDP. Meanwhile, the amount of tax revenues collected by taxing property and capital has not gone up at all.”
Is there a way to suggest that without repeating Theresa May’s “Dementia Tax” debacle in 2017?
Perhaps that’s where the Covid pandemic can help. A crisis where young people have sacrificed their livelihoods and social lives to protect their beloved elders could be the trigger needed for older generations to reassess their own responsibility to the young.
Because, for all the caricatures of selfish youngsters raving at house parties with no thought of the risk to their grandparents, young people have proved some of the most diligent at following the lockdown rules. Wealthy members of the boomer generation will have watched from the comfort of their relatively large and expensive homes, receiving their monthly pension, as younger family members have shut themselves away in small rented flats on their behalf, lost jobs, and worried about how to fill an ever-growing fiscal black hole. After all that, why wouldn’t they want to give something back?
And that’s why Willetts remains an optimist.
“Although sometimes I’m presented as a generational warrior, one of the reasons I wrote the books is that I genuinely think older people care about the prospects of their kids and grandkids, and similarly young people want their granny to be protected from the virus and have a decent income.
“So actually, generational solidarity is one of the most powerful forces we can harness as we emerge from the virus.”