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"Jam" vs "Jilted": interview with co-founder of the Intergenerational Foundation

The Intergenerational Foundation is a new think-tank founded to research fairness between current and future generations in the UK. We interview the co-founder, Shiv Malik
Oliver Huitson
10 June 2011
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Through both demographic and policy changes, the nation has witnessed a steep redistribution of wealth from younger to older cohorts. Last month, the Intergenerational Foundation was established: a think tank with an aim to explore these imbalances and find ways of ensuring a fair distribution of resources, burdens and obligations between young and old. Here Oliver Huitson interviews Shiv Malik, who co-founded IF along with Angus Hanton. 

Following David Willetts’ The Pinch, your own Jilted Generation and now the founding of IF, why have intergenerational politics become so prominent?

In everything from housing and education to pensions, taxation, employment, health and the environment, the older generation as a group are neither paying the true cost for the resources they use nor paying a fair amount of tax for the economic gains they have made. The effects of this disregard towards younger and future generations are just beginning to emerge. The Intergenerational Foundation has been actively sponsoring research in these areas.

What are the key problems that need to be addressed to build a fairer inter-generational settlement? 

Firstly – housing. According to Martin Weale, if house prices had gone up in value at the same rate as the stock market over the last 20 years (5% a year), an average house would now be worth 50% less than it is now. This skewing of the housing market has led to the birth of the ‘Generation Rent’, the first post-war generation to be unable to afford to buy their own homes. We now have record breaking monthly rents and a taxation structure that has systematically transferred housing wealth to older people. Young families are beginning to put off having children, couples are leaving it later and later to settle down. If there is a reduction in the taxable young working cohort there will simply not be enough tax-payers to support the older generations.

These same young people are expected to pay the pensions of the famous ‘baby boom’ generation, a population bulge that is accused of ‘pulling up the ladder behind them’ by David Willetts. In addition, many unfunded public sector workers’ pensions, promised by successive governments, will need to be paid by future taxpayers and represent a burden of about £1 trillion. Add to this the massive rise in life expectancies. 

In 2010 the NHS spent about half of its entire annual budget of £100bn on the over-65s, according to Willetts. With the baby boomers retiring and forecast to live longer, often unwell, there is another burden that younger generations will be asked to pay – the prescriptions, care costs and healthcare needs of an older generation.

At the younger end of the spectrum, however, policy makers have cut benefits; child benefit is now means-tested, educational maintenance grants have been scrapped, Sure Start centres closed and university fees have been trebled.

The UK tax regime is remarkably generous to those with accumulated savings. There is a raft of options for receiving interest, dividends and capital gains with little or no tax, such as ISAs, SIPPs and VCTs. By contrast, taxation on earned income is heavier than on unearned income, because National Insurance (effectively an income-tax surcharge) is deducted from earned income and is therefore a tax on workers, invariably younger generations.

Now add an unstable employment market. Unemployment amongst 16-24-year-olds has risen by 50% in the last decade to nearly 1 million. One in six young people are now classed as “NEETs” [Not in Education, Employment or Training]. Unemployment may not be new but the situation today is. Job tenure has fallen by 25% since 1975, the number of part-time jobs has more than tripled in the same period. The average entry wage is half the average national wage.  The rise in internships illustrates how hard it is for the young to get paid work and how a paid career is deferred for many.

Finally, younger and future generations will be inheriting environmental degradation. This is the older generation’s intergenerational legacy and future generations will have to pay for the profligacy of current generations – indeed their very survival could be at stake. Current consumers continue to increase liabilities for future generations. 

To what extent can these issues be separated from the economic orthodoxies of the last three decades?

Market-driven liberal economics and globalization have created new concentrations of capital favouring older generations, who have failed to develop long-term strategies to ensure that the benefits flow down to future generations – the mark of a well organized civil society. The Intergenerational Foundation is looking at ways to undertake effective modeling to research how different scenarios will play out.

Some have argued that intergenerational politics is a distraction, something that obscures other, more fundamental, divisions and injustices in society. Is this a fair criticism? 

Far from being a distraction, people have not been thinking enough about intergenerational fairness as it impacts every member of every family. Intergenerational discussion shines a light on what our ideas of obligation should be to each other rather than centering thoughts on ourselves. 

The Coalition has embarked on a fairly radical policy programme, not least in the areas of education and health provision. From a generational perspective, how have the Coalition performed so far, and what are your biggest concerns?

To take the right of free education from the younger generation under the guise of austerity has scandalised many people. The Coalition is only too aware that the real issue is how to fund our increasingly aging and long-living population.  Rather than asking their voter-rich generation to take greater responsibility themselves, the coalition went for an easy target. 

Opponents might argue that wealthier families will end up paying university fees themselves but the education budget is dwarfed by OECD research stating that “the cost of Britain’s ageing population will be 10 times more expensive than the financial crisis.”

We are in unknown territory together with Germany and the United States. The idea of cradle to grave benefits cannot be sustained. The younger generation already knows this. The older generation of policy makers continue to turn a blind eye and the damage is that the Coalition becomes complicit in this deception.

The Private Finance Initiative is perhaps the most flagrant case of spending money on the children’s ‘credit cards. Despite tough words in opposition, the Coalition has signed off scores of new PFi projects. Is PFi compatible with a just generational settlement?

In order to run a well-balanced society, infrastructure investment is always going to be required, whether it be a railway line, hospital or school. We, as citizens, want our politicians managing the building of institutions and transport hubs to ensure they benefit society as a whole, but the most efficient way to do this is through explicit government borrowing at low rates of interest rather than disguised borrowing with high and inflexible costs.

Ed Miliband talked of ‘the British promise’, that each generation should have more opportunities than their parents. Is this still a realistic aspiration, and how might it be achieved?

Ed Miliband’s aspiration is not consistent with the way current and past policies have loaded obligations onto younger and future generations. “The British Promise” is pure ‘spin’ – our focus is on economic realities. 

The Intergenerational Foundation (IF) will be calling for a fundamental re-examination of taxation, pensions, inheritance, housing and healthcare policy, as there are some big questions that policy makers need to engage with:

  • Should there be more house-building and better use of the existing stock?
  • Should there be incentives such as IHT discounts to release the housing dead-lock?
  • Why won’t the government admit that unfunded pension promises will be hard to pay?
  • Should there be means-testing of universal benefits?
  • Should taxation increase for the asset rich?
  • Should there be fairer distribution of healthcare budgets along intergenerational lines?
  • Is the older generation paying its way?

The major risk we face is the self-interested voting patterns of older generations and part of our work will be to encourage younger generations to say ‘enough is enough’. Younger generations may get angry and disillusioned. With arguments raging over global warming and climate change, the real issue is how we pay for future energy, food and water supply whilst leaving the planet as clean as possible for future generations.

The Intergenerational Foundation hopes to provide a forum for discussing these challenges and putting together viable solutions.


 

For IF queries, please contact [email protected]

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