The young and the left: would Labour really tackle intergenerational inequality?

Support from the under-40s helped Jeremy Corbyn confound expectations in the election – but why?

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It’s the young wot won it! All right, I know – Labour didn’t actually win the election. Nevertheless, it certainly felt like a loss for the Tories; and it’s equally certain that young people turned out in large numbers and that age was one of the few characteristics reliably associated with the way people voted.

YouGov’s post-election survey of more than 50,000 British adults found both that women were just as likely to vote Tory as Labour and that the Conservatives’ small overall edge in the share of the national vote was reflected almost identically across the wealthy and the working classes.

It was voter age alone that showed a vivid correlation with choice of party. Nearly two-thirds of voters below the age of 40 opted for Labour, and the proportion of ­voters choosing the Tories rose with every decade of age, without exception.

This simple fact is probably the single most important outcome of the election. Political leanings (let alone party affiliations) are hardly fixed – and perhaps the Corbyn­ista cohorts of today will mature into the middle-aged Mayites of ten years hence. Yet for anyone who lived through the generational political shifts that led to the Thatcher and Blair eras, there is little reason to doubt that the size – and, dare I say it, the momentum – of the current demographic alignment to the left will define the next couple of decades.

That makes it particularly important to understand why such a high proportion of young people voted for Labour and against the Conservatives. What is it that they want from their representatives – and are the policies on offer from either main party likely to provide it?

Answering the first question requires a bit of educated guesswork. However, most plausible responses leave me sceptical that either Labour or the Tories are yet anywhere close to an agenda that can satisfy the young’s quite legitimate concerns.

The first issue on which opinion diverges starkly between young and old is Brexit. We know that, because the breakdown of voting in the 2016 referendum showed clearly that young people overwhelmingly favoured remaining in the EU, while the old predominantly voted to leave.

Brexit is an issue on which neither of the main parties offered the youth what they wanted: both Labour and the Tories opted not to challenge the referendum result. Yet Labour has appeared less inclined towards a hard Brexit, if only by virtue of confusion, so it probably scores with the young on this front more than the Tories do.

Leaving aside any ideological preference for brotherhood and unity, the desire of the young to stay in the EU as it is makes perfect sense on economic grounds. What is crucial is the most contentious aspect of the single market: freedom of movement of EU member-state citizens across the countries of the Union. Young people want the option, by right, of living and working in other European countries.

Brexiteers argue this suits only the children of the cosmopolitan elite: for working-class youth, the freedom works the other way, with entry-level jobs that they should be starting out in going to immigrants from the southern and eastern EU. There is some truth to that, but the young are more far-sighted. The Brexiteers are describing the economy of the past decade, when Britain’s labour market has been buoyant, while southern Europe has been comatose and the east still a long way behind.

One day – perhaps soon, by the looks of the most recent data – the boot will be on the other foot. It will be young Brits who are looking for jobs, and the Continent will be booming. How foolish it would be for the UK to have provided employment support for the rest of the EU’s youth in the good times – and then to cut its own youth off from the same opportunities just when the cycle turns. The young are right to seek a Brexit that will allow them to reap the returns on the investment we have put in; or, better still, no Brexit at all.

The second glaring fault line between young and old that seems even more likely to lie behind the election result concerns intergenerational inequality – of wealth, of income and of the impact of austerity. Three things in particular are running sores: education, housing and pensions. The old (even the middle-aged) got their education for free; the young are being made to pay. The old own the housing stock and have ridden successive tidal waves of house-price appreciation that have left ownership far out of reach for the young. And the old enjoy triple-locked state pensions, while the young are told to save for themselves.

In the public debate, these things are often blamed primarily on austerity. Student debt, in particular, is the consequence of cuts. The collapse of home ownership among the young is the result of the paucity of social housing. So it is perhaps unsurprising that Labour scooped up the youth vote. Yet the real reasons for these crises of inter­generational inequality are more complex. Somewhat bizarrely, it was the Tories who fronted up with the more ambitious solutions in their manifesto.

The root of the problem lies in the interaction of steadily increasing life expectancy and the vast leaps in nominal wealth generated by various nationwide, even worldwide, financial policies of the past four decades. The outcome has been ever greater public liabilities, on the one hand, resulting from the need to look after many more old people, and ever more valuable private assets – mostly housing – in the hands of the same old people, on the other.The question is how to fund the public ­liabilities. Generally speaking, there are two choices. The option favoured by successive governments to date is to pay for them by taxing income. Such taxes inevitably fall disproportionately on the young, because they are the ones in work.

The alternative is to tax wealth, whether it is tied up in savings, or housing, or something else. Wealth taxes fall more on the old. Given that the liabilities are accruing on account of the old, it would seem both efficient and fair that it should be the taxation of wealth that should fund them – and one would expect the young in particular to support that strongly.

The surprise is that it was the Tories who proposed a significant wealth tax; and in the manifesto commitment that was the most emblematic of their catastrophic campaign, no less. One can debate the details of its design, and its presentation may have been lamentable, but the “dementia tax” was a means of addressing both of the largest contributing factors of intergenerational inequality: that the old need more public spending and that they also own most of the private assets. Labour’s offer, by contrast, was to raise taxes on income. It was focused on corporate income and on the richest 5 per cent of individual earners, but the amounts targeted were not realistic. The basic principle was clear, however: that ­income taxes should rise to pay for public services. Seen through the inter­generational lens, that inevitably means that the young should pay yet more for the old.

But the young voted in droves for Lab­our’s approach and not for that of the Tories. I, for one, find this a worrying ­development. This issue and this policy – no matter how important they are – cannot be seen in isolation, and there were many other valid and, perhaps, more immediate concerns about public spending at play. Nevertheless, it is a disturbing paradox that the young not only saw no merit in a rare and substantial proposal to skew things back in their favour, but somehow came to believe that it was something they should oppose.

I suppose it simply shows that when it comes to the legacy of intergenerational inequality which the baby boomers have bequeathed to Britain’s youth, neither Labour nor the Tories have yet devised a solution that both works and sells. 

Felix Martin is a macroeconomist, bond trader and the author of Money: the Unauthorised Biography

This article first appeared in the 29 June 2017 issue of the New Statesman, The Brexit plague