A new report has suggested a raft of new measures to help tackle the growing challenge of intergenerational inequalities.
The proposals, from the Intergenerational Commission, would create a better funded NHS and care system, radically reform the property market and provide young adults with a £10,000 ‘Citizen’s Inheritance’.
The so-called ‘generational contract’ reflects the fact that society needs to be able to look after its older members, but also that in a progressive society each generation should have a better life than the one that preceded it. However, the commission recognises that, in the current economic environment, more people are questioning whether young people today have the same prospects as their parents.
According to the report, millennials today are half as likely to have purchased their own home by the age of 30 than baby boomers, and four times more likely to be renting privately.
The reports also claims millennials’ home and work life is likely to be less secure than previous generations. Twenty-somethings are 25% less likely to have changed jobs than ‘generation x-ers’ and have missed out sizeable pay rises as a result, while the number of families raising children in rented accommodation has trebled to 1.8 million in the past 15 years.
Yet the report also notes that financial pressures on NHS, care and social security budgets means that there is a risk that older generations will not get the treatment and care that they deserve.
In order to ensure that all generations are treated fairly, the commission has made a number of recommendations, including:
- A £2.3 billion NHS levy to improve its financial position. This would be funded by extending national insurance to those working beyond state pension age and introducing a new, lower rate to the by income of richer pensioners.
- Pensions would be subject to major reform too with a new flat rate of 28% tax relief applied to all contributions and a cap to the amount of money that can be taken out of a pension tax free.
- Give social care a cash injection of £2.3 billion, funded by a new property tax that would replace council tax. This would offer the option of deferred payments for asset rich income poor homeowners as well as those on low incomes. A new method of care funding would require those who can afford to pay for their own care to do so, but with caps to limit overall contributions.
- Improve the position of first-time buyers and movers by halving stamp duty and introducing a time limited cut to capital gains tax for those selling property to first-time buyers.
- Make it easier for renters to put down roots by introducing indeterminate tenancy agreements and three-year ‘light touch’ rent stabilisation.
- Improve working conditions for those on zero-hour contracts, including the right to a regular contract. Shift workers should get better notice of when they will be required to work.
- A £10,000 citizen’s inheritance for all 25-year-olds to put towards buying a home or starting a business. This would be funded by a new ‘lifetime receipts’ tax, which would replace inheritance tax. The commission hopes this would reduce tax avoidance. The tax would be applied to recipients, rather than the estate and rates would be lower.
Commenting on the proposals, David Willetts, executive chair of the Resolution Foundation which wrote the report, says: “Britain’s contract between generations lies at the heart of society. As families we provide for our children and parents at different times. We expect the state to support these natural instincts – but too often it is tilted in the opposite direction.
“Many people no longer believe that Britain is delivering on its obligations to young and old. But our commission shows how Britain can rise to this challenge.
“From an NHS levy to put healthcare on a firmer financial footing, to building more homes and a Citizen’s Inheritance to boost young people’s career and housing aspirations, our report shows how a new contract between generations can build a better and more unified Britain.”
However, Tom Selby, senior analyst at AJ Bell, questioned some of the proposals. He says: “The Resolution Foundation has thrown the kitchen sink at some of the biggest challenges facing society today. Some of the ideas, such as paying £10,000 to everyone over the age of 25, feel like gimmicks that will never see the light of day. Others would face severe practical challenges if they were to be implemented.
“There would be significant complexities to overcome in establishing a flat-rate of pension tax relief, particularly in relation to defined benefit pensions. Furthermore, any move to cap tax–free cash would need to be fair to those who have already contributed to a pension based on the rules of the existing system. It is also critical any attempts to address intergenerational fairness through the pension system do not inadvertently damage incentives to save in the UK.
“Although this report adds welcome stimulus to the intergenerational fairness debate, many of the ideas aren’t new and face the same barrier as other reforms – namely the reality of politics. Ultimately, it is hard to imagine any would-be Prime Minister campaigning for election on a platform of raising taxes for those over state pension age or hacking back tax-free cash, one of the biggest attractions of saving in a pension.
“We also need to remember that constant uprooting of the system does little good for confidence and trust in pensions. Savers crave stability, so any radical package of reforms should come with a commitment not to move the goal posts once again a few years down the line.”