After a lengthy inquiry, MPs on the Work and Pensions Select Committee have published their recommendations to tackle intergenerational fairness.
In short they suggest scrapping the triple lock on pensions and reviewing the winter fuel allowance. But are these measures the best way to promote fairness between the generations? Or will they simply increase tensions between the generations while failing to address the fundamental problems?
There is little disagreement that younger generations have fared worse during the years of austerity. The generation currently in their twenties are the first to be worse off than their parents, while many older people have seen their income grow faster than people of working age.
A multitude of issues underlies this generational divide. Perhaps the biggest grievance amongst young people is that they are unable to afford to buy their own home and find renting increasingly expensive. Yet they are also expected to pay through taxation on their earnings for an ageing population and its growing pensions, health and care bills.
Will the MPs’ recommendations tackle these issues? Or are there other solutions to the housing crisis and fair taxation which would provide long-lasting answers to one of the biggest issues of our time?
The housing crisis stems from a shortage of homes and the lack of housebuilding over the last three decades. We need to be building at least 300,000 new homes a year to address this problem. And some of those new homes should be for older people to help release some family-sized homes for younger generations.
Only by increasing supply will we meet the demand for more homes and help reduce prices.
At the same time we live in one of the richest countries in the world, but one where inequality continues to grow between the richest and poorest in our society. Taxation is the traditional way in which we share our resources to pay for the services and support we all need. But the balance of tax has failed to keep up with changes in our society where less of the GDP now comes from labour. We need to shift from taxing income to taxing wealth to reflect that change.
Taxing wealth and those on higher incomes would hit people aged 45 plus more because that’s where wealth lies in our society. But it would be a fairer way to pay for and sustain what we all will need in later life, while ensuring that younger generations aren’t left paying more of the bill from their hard-pressed incomes. It would also provide a guarantee to younger generations that decent health, care and pensions would be there for them to use when they retire.
All in all, fairer taxation and building more homes for all ages would tackle some of the fundamental issues underpinning intergenerational unfairness.
So where does that leave the MPs’ proposals? Scrapping the triple lock on pensions so that they only rise in line with the incomes of working age people seems fair on the face of it. But it would penalise those pensioners on low and middle incomes while not hitting those on high incomes. More importantly it fails to address the inequality issue in our society. Indeed it would increase inequality and undermine all that has been done in recent years to reduce pensioner poverty.
Taxing wealthier older people would be a fairer way forward. Using some of the extra tax receipts to invest in new homes would also help younger generations.
Sadly the MPs have missed the point in their inquiry and thereby missed a real opportunity to promote intergenerational fairness. The government not surprisingly has already rejected their recommendations but, in doing so, it too has turned away from looking at ways to unite not divide the generations.
United for All Ages