A Rabbit Out Of The Hat

A Rabbit Out Of The Hat

The last Autumn Statement gave scant regard to younger generations. Fast forward to the forthcoming Budget and already there is mounting speculation that the Chancellor is going to unveil a plethora of intergenerationally fair policy measures. But will the policies announced really translate into greater political support from younger generations?

A brave politician could tackle the intergenerational inequity in higher education finance head on. Abandoning tuition fees entirely may be a step too far for a Conservative government but reducing fees, scrapping high interest rates (currently 6.1%) and lowering the 9% repayment rate, would all deliver a bigger saving both for today's students - most of whom will earn more than the proposed threshold of £25,000 annual earnings - and to future taxpayers than merely freezing tuition fees. Reintroducing maintenance grants for the poorest students would also send a signal that the government cares about the less privileged.

For younger generations who do not access higher education the derisory £3.50/hr apprenticeship rate for 16-18 year olds urgently needs addressing. At the Intergenerational Foundation we hear over and again how it's the cost of getting to a training establishment that is so prohibitive to many young people. Some kind of Youth Travel Voucher or concessionary fare scheme for apprentices would surely be welcomed.

Stamp duty holidays for first-time buyers may seem an attractive policy offer but for every 1% drop in stamp duty house prices increase by about 1.4%. History also tells us that market activity increased by 20% when stamp duty was decreased in 2008/9, again fuelling house prices. Better policies would be to further discourage "landlording" investment, actively promoting nudge policies to reduce house prices over the long term, and encouraging older generations to consider downsizing outright or even downsizing in situ - that is getting a tax break if they subdivide their own homes so they can stay in their local communities, while at the same time increasing the housing stock.

Making the tax system more intergenerationally fair with the rescinding of National Insurance contribution (NICs) exemptions for the over-65s would level the playing field between young and old in the workplace. It cannot be fair that an older worker, doing the same job as a younger worker, effectively gets a 12% pay increase just by sheer fluke of age. Charging NICs on the 1.1 million over-65s still working would raise an extra £2 billion a year for the NHS, which is already overwhelmed with caring for a rapidly ageing population.

Instead, like all recent governments, both left- and right-leaning, it is likely that that the Chancellor will veer away from tackling the bigger ticket items such as keeping the Triple Lock on the State Pension, with its current liability running at over £5 trillion.

The good news is that intergenerational fairness, following the "Youth quake" at the recent General Election, has made politicians sit up and listen. Getting a hammering at the ballot box does wonders.


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