The generational divide exposed by the EU referendum will worsen because of Tory tax and benefit plans that will redistribute billions of pounds from the young to the old, the independent Resolution Foundation says today.
New analysis of how money will shift from young to old over the next four years has been produced by the foundation as it announces a new intergenerational commission aimed at creating a fairer deal for voters aged under 25. The analysis, which breaks down the impact of tax and welfare changes planned for this parliament by age, shows that people in their 30s will experience the biggest losses of any age group, losing an average of £220 a year by 2020.
In contrast, people in their 60s are set to be the largest beneficiaries, gaining an average of £170 a year. The research also shows that 45 is the age at which people, on average, move from losing to gaining from forthcoming tax and benefit polices in this parliament.
The RF warns that voters aged under 25 – 75% of whom voted to stay in the EU – will feel increasingly aggrieved by having their European future determined by older voters while at the same being hit by tax and welfare policies which switch money from them to the elderly.
The differences across generations are clearest in relation to working age benefits and the reduced generosity of Universal Credit, which fall most heavily on those in their 30s. The average benefit losses experienced by those in their 30s is £480 a year – 16 times greater than the average benefit losses facing those in their 60s.
According to the RF data, the next prime minister will inherit planned tax and benefits changes which will lead to massive further redistribution from young to old, with millennials losing a total of £1.7bn while baby boomers gain around £1.2bn by 2020. Some of these changes are due to come in as soon as April 2017.
David Willetts, who is executive chair of the foundation and will also chair the commission, said: “Britain is bound together by a social contract based on mutual support between generations.
“But these economic and cultural ties are under severe strain, and were brutally exposed last week as young and old took different sides on the EU referendum vote. The new prime minister will need to prioritise the pressing task of repairing our divided nation.
“The Intergenerational Commission I’m chairing will bring together some of the best minds in Britain to better understand how policy impacts on different generations, and encourage future governments to avoid repeating past mistakes of past ones who have failed to support today’s younger generation in particular.”
The state transfer from young to old comes on top of a wider pay squeeze across Britain in which the typical earnings of those in their 20s and 30s have been squeezed three times as much as those aged 60 and over.
Members of the Commission will include Dame Kate Barker (ex-Bank of England), Torsten Bell (Resolution Foundation), Carolyn Fairbairn (CBI), Lord Geoffrey Filkin (Centre for Ageing Better), Sir John Hills (LSE), Paul Johnson (IFS), Sarah O’Connor (Financial Times), Frances O’Grady (TUC), Ben Page (Ipsos MORI), David Willetts (Commission chair and Resolution Foundation) and Nigel Wilson (Legal & General).
Torsten Bell, the RF’s director, added: “Questions of intergenerational fairness are moving to centre stage, representing a new form of 21st century inequality. It’s time they were better understood and answered.
“From the catastrophic failure to build new homes to inadequate care provision for older generations, all too often the short-termism of public policy means we fail to properly address these issues.
“And too often we simply ignore big intergenerational effects of policy. The new prime minister will shortly inherit government’s tax and benefit policies which redistribute billions from young to old in the coming years, compounding both the living standards squeeze that has hit millennials the hardest in recent years and the feeling of disappointment at the referendum result.”
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