The inter-generational gap: The Pinch and the Punch
Picture credit – The Resolution Foundation
The Pinch
David Willetts’ 2011 book ‘The Pinch’ came complete with the provocative subtitle “How the baby boomers took their children’s future – and why they should give it back”. His central charge was that this supersized demographic cohort had managed to concentrate much of the nation’s wealth in their own hands, especially in terms of property ownership and vocational pension entitlements.
On top of this, their political power elected governments that ran deficits in good times, introduced tuition fees for students, and oversaw rapid asset price inflation whilst making sure that general inflation (acting as a tax on wealth) was kept firmly under control.
None of this was an act of deliberate selfishness. It was simply a consequence of the way democracy works, and also a collective – and very human – inability to appreciate how much they ought to be investing for their own retirement.
State pension age remained static as life expectancy rose, and companies got away with funding their defined-benefit schemes on the never-never, assuming future compound returns would cover the grand promises those schemes made. This kept profits up whilst the boomers were in work, since a good proportion of pay was deferred. But it has now left many of our biggest companies dwarfed by the size of their own pension schemes, which are now sucking out corporate profits that could otherwise be used for reinvestment.
The Punch
At GE2017 both major parties proposed measures that would start to address this intergenerational unfairness. The Conservatives downgraded their pensions triple lock to a double lock, and proposed reforming the funding of social care so that those with more private wealth would contribute more, in some circumstances. Labour offered to abolish tuition fees and proposed rent controls. The irony of course is that the hung Parliament has meant neither set of proposals have yet been adopted.
In the context of our deficit still being £52bn, I think proposing what amounts to additional tax is more intellectually honest than additional spending. Furthermore, the Conservatives’ proposals were more progressive – tuition fee abolition in particular being a policy aimed squarely at the middle class. But there is no denying that Labour hit the electoral jackpot with their pitch to the young. Turning out in unexpected numbers, they delivered an uppercut to Mrs May’s hopes of a majority (and a knockout blow to my own more distant hopes in Don Valley!)
Youth turnout soared by 16% among 18-24 year-olds and 8% among those aged 25-34, according to MORI. But given the very close result, the more modest decline in turnout among the over-55s was equally crucial.
Not only did the age turnout differential reduce dramatically (scuppering most models), MORI reported the biggest age gap in voting intention since their estimates began in 1979. Conversely, the class gap in British politics has never been smaller, with the Conservatives doing their best ever among C2DEs and Labour their best among ABC1s. Age is now the big dividing line in our politics, which would seem to bode well for Labour.
The Crunch
Given the size of the boomer cohort, I actually think it would be possible for the Conservatives to restore their majority without specifically addressing the concerns of the younger generations. After all, we were only 9 seats short of an overall majority despite being generally outcampaigned by Labour, not least because of the enthusiasm of Corbyn’s youthful supporters.
However there is an intergenerational unfairness and my party needs to address it. But I agree with Stephen Bush that tuition fees are a red herring. Though there are definitely a few things that need adjusting within the present system, I think the principles behind it are sound – even whilst acknowledging my own good fortune to have got in just in time. In any case, it is difficult to outflank an offer of “free”.
It is housing that is at the core of this issue, so we have to find a way to make housing more affordable for the young – whether renting or owning. Willetts’ Resolution Foundation finds that the average family spent just 6 per cent of their income on housing costs in the early 1960s: this has trebled to 18 per cent.
On ownership, today’s families headed by 30-year-olds are only half as likely to own their home as the baby boomer generation was at the same age. New towns could be one way of delivering more supply. And on social housing, it is good to see that Sajid Javid has launched a Green Paper. Right to Buy was a fantastic engine of social mobility but our housing stock was not sufficiently replenished. I would also like to see stamp duty reformed to encourage baby boomers to downsize in their retirements.
One-Nation Conservatism is most often associated with the class divide, but the lessons surely apply across the generations as well: we owe obligations to those less privileged within our society.
Disraeli himself claimed, “A politician thinks of the next election. A statesman thinks of the next generation.” Our challenge is to do both.
Aaron Bell
Aaron works in the betting industry and is a long-standing contributor to politicalbetting.com, posting under the username Tissue_Price. He stood for the Conservatives in Don Valley at the General Election.