A new dawn for intergenerational fairness?
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Intergenerational Fairness
in 2024
Our summer newsletter welcomed a new dawn for intergenerational fairness. We hoped to see the Labour government more equitably raise tax revenue and spend it more fairly across generations. The government started well with the swift announcement of reforms to winter fuel payments. The faux outrage that followed a sensible policy reform has been extraordinary.
We want to thank you for your interest and support in our work in 2024. We hope to see progress on improving the prospects of the nation's children and younger people in 2025. With your help we can do so much more!
What were the wins and losses for children and young people in the new government's first Autumn Budget?
Winter fuel payments
IF has long called for the abolition of this "bung" to the old, which was brought in 27 years ago and only originally intended as a short-term fix. After all, Cold Weather Payments already exist for all ages and kick-in once the temperature has fallen below zero for seven consecutive days for those that are eligible.
It seems wrong to us that younger workers should have to subsidise the fuel costs of wealthy older people when three million over-65 year-olds live in millionaire households and simply do not need winter fuel payments. We therefore welcome the government aligning winter fuel payments with other means-tested benefits. We actively encourage any over-65s who need help to sign up to Pensioner Credit. We are also happy to debate whether the threshold should rise as long as all those affected by benefit thresholds, whatever their age, are included in that discussion, especially when one million children experienced the horror of destitution in just one year alone.
Employers NICs will hurt the young
The Chancellor unnecessarily backed herself into a corner by pledging not to increase income taxes, National Insurance contributions or VAT. A wealth tax was also vetoed as was the removal of the overly generous “triple lock” on the State Pension. Where then was she to find £22 billion in tax revenue? Her answer was to increase Employer’s National Insurance contributions (NICs) from 13.5% to 15%.
At IF, we believe that increasing NICs on employers will end up being a tax on young people’s jobs. Already we are hearing anecdotal stories of jobs disappearing the day after the budget as organisations froze job hires until they better understood their new tax liabilities. It means: less confidence over expanding; potentially lower wages; and potential redundancies for younger workers who will cost more in NICs’ terms than their higher-earning colleagues.
Pension pots and IHT
On intergenerational fairness grounds we support pension pots losing Inheritance Tax (IHT) exemptions. After all, pensions are a government-backed vehicle for saving to cover the cost of living in old age. They were not intended to act as a tax-efficient means of avoiding IHT. By taxing pension pots on death, state pension tax relief given on contributions throughout one’s working life, and which is unspent on death, is actually being re-cycled back into the system. That seems intergenerationally fair to us. But intra-generational unfairness arises when private sector pension pots are affected but public sector pensions are not because most public sector pensions become annuities when in payment.
Student finance
The new government has already reneged on their pre-election offer to students by increasing annual student fees to £9,535. While increases in student maintenance loans are welcome, the 3.1% increase offered is undermined by the freeze on the parental income threshold which affects how big a student’s maintenance loan can be. It means that many families, also suffering from the cost-of-living crisis, will have to dig even deeper.
We at IF believe that separating the student loan offer from the repayment terms for graduates is a cynical form of divide and rule. Graduate cost-of-living has once again been largely forgotten. The previous government lowered the annual threshold of repayment for new Plan 5 students to £25,000 and extended the loan term to 40 years. It means that today’s students will be pulled into repayment much earlier and could still be paying back their student loans well into their 60’s. What’s more, with the increase in National Minimum Wage rates, unless that £25,000 threshold is raised, we fear that too many low-earning graduates be drawn into immediate repayment. Don’t forget that anyone over 55 years of age today received their higher education for free!
Students and graduates are caught between a triumvirate of Universities UK, DFE and HM Treasury who care more about feeding the system than future graduate tax rates. The Office for Students (OFS) has been largely toothless until now. We have yet to see whether the Secretary of State’s “full” acceptance of the OFS review recommendations will give the OFS the power it needs to protect students’ consumer rights.
That’s why we need your help to keep up pressure on the new intake of parliamentarians to deliver the radical change younger and future generations need for fairer futures.
If you want to catch up on our other recently published research on the housing crisis on a local authority level, taxation, why the government should promote trains over planes, the rapid ageing of the countryside, the lack of young people's savings or how intergenerational fairness should intersect with the net zero transition, go to our research pages on IF's website.
Our latest research report explains that younger households have to spend much more on “essential” costs than older households. While younger household’s discretionary spending has fallen off a cliff, older household’s discretionary spending has actually increased. The idea that we’re all in this cost-of-living crisis together doesn’t stand up to scrutiny, largely due to the prohibitive cost of housing and rents which, is sucking money from young people's pockets.
We will use our research to identify those MPs in areas where the housing crisis is most acute and call on them to champion genuinely affordable, the safe and secure new homes that younger generations need.
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Our good friends GenSqueeze in Canada, Think Forward in Australia, Germany’s Foundation for the Rights of Future Generations and the Netherland’s Milliongenerations Foundation, came together on 16 November for a day of international action on intergenerational fairness calling on our respective governments to better protect the interests of younger and future generations. IF supported the day with a series of articles on wins and losses for younger generations in each country. Read more at www.if.org.uk/blog. |
IF has long been concerned about Private Finance Initiatives (PFIs). Back in 2012, Professor David Parker, the official government historian to privatisation, wrote IF’s seminal report on the subject. We welcomed the demise of PFI in 2019 following the collapse of many PFI projects - think Carillion, Metronet and NHS trusts struggling to repay PFI debts.
With the new government announcing its intention to bring back PFI, IF has written about the current state of play here: 700 existing PFI contracts, 200 of which are set to expire within the next 10 years. IF argues that there should be intergenerationally fairer ways to deliver new infrastructure while not overburdening younger generations with PFI debt. If you have expertise in the area and want to by join IF’s PFI Watch Group, please email liz@if.org.uk.
We also welcome Meera Saravanan, a Royal Holloway politics student, on a one-day-a-week placement charged with boosting IF's engagement with students and young people. If you would like to discuss a university student IF placement scheme in 2024/5, please email liz@if.org.uk.
Catch up on intergenerational fairness issues with our What IF? Podcast. It's already achieved more than 5,350 downloads and is in the Top 50 of podcasts. Available on Apple, Spotify, Chromecast, Goolge etc.
IF works with organisations and businesses on research that is of mutual benefit. If you would like to discuss how to support our work and how our partnerships work please email liz@if.org.uk to set up an initial meeting.
We want to thank the LPDF for choosing IF as its charity of the year during 2023 and 2024. The charity donation provided has given IF the opportunity to expand our housing research, have a dialogue with the industry, speak at events, and undertake geographic and local authority housing research we would not otherwise been able to do. The LPDF supported our calls for more genuinely affordable social-rented housing, increasing supply across all tenures, increasing density and reforming Right to Buy.
Newsletter image courtesy of: wikimedia
Conor has joined IF as an Economic Researcher. He has an Australian PPE degree and is currently completing an MSc in Philosophy and Public Policy at the London School of Economics. Conor is particularly interested in how we could use the taxation system to fairly distribute the economic burdens arising from an ageing population and demographic change.
IF’s comment and spokesmanship continues to grow. Recently Liz Emerson’s article in The Telegraph led to 2,700 comments. The team has also responded to media calls on student finance, employer National Insurance hikes, young people’s tax rates, housing, inheritance tax and pensions resulting in more than 50 national news items, scores of radio and TV interviews and invitations to speak at other think tank events, All Party Parliamentary Groups, conferences and panels.
But, we really need personal stories to help journalists bring their news items to life. So, if you have a story to tell on the cost-of-living crisis, high taxation, student fees and student living costs, high rents, moving back home, the inability to save or buy a home of your own, please consider being a spokesperson for IF. For more information email: media@if.org.uk.
