5Strengthening the intergenerational contract
Intergenerational fairness and policy-making
88.Growing concerns about the intergenerational contract make it vital that policy-making incorporates consideration of intergenerational fairness. Information is key to this. We heard, however, that such information is scant. This could contribute to intergenerational concerns being overlooked. Professor James Sefton told us:
I think there is an awareness of intergenerational sharing. [ … ] I think what is lacking is a conversation and figures to base that around. We don’t understand exactly what the amounts are, what the key factors are, how they interact, how the Government sector interacts with the private sector and what the key areas are. [ … ] We need to get the figures out there first to get the discussion going.159
89.Michael Johnson called for new legislation to be accompanied by “intergenerational impact assessments” which would “express in cash flow terms the impact on the burden of taxation in the future”.160 This, he argued, would:
introduce at the heart of the legislative process some way of bringing to the surface the cash flow or tax burden consequences of the future generation of the promises that we are making to ourselves today.161
90.As noted in Chapter 2, there is no up to date and comprehensive analysis—historic or prospective—of intergenerational redistribution over the whole lifecycle.162 The Academy of Social Sciences highlighted the gaps in our knowledge in this area:
We lack a full or even partial set of age-specific accounts that include not just cash receipts by age groups through social benefits but the age breakdown of public services. Recent analyses focus on pensioner benefits but neglect social care (where austerity has cut places). Such accounts would need to include the recent expansion of student loans, both as a benefit and a liability as well as policies (such as apprenticeships and the national minimum wage) where the direct cost is being moved out of public spending to company balance sheets.163
91.In Chapter 2 we cited the hugely valuable research conducted by Professor John Hills which estimated the intergenerational distribution of social protection expenditure and receipts over lifetimes.164 The research is now more than a decade old and was based on even older data. It does not, therefore, take account of economic trends and policy changes in the interim period.
92.Ashley Seager described this kind of generational lifecycle analysis as “an enormous undertaking that does need to be done”, but which the Intergenerational Foundation has not yet been able to attempt.165 Professor Sefton provided us with an overview of the range of administrative and survey data sources that could be drawn upon to develop a life-cycle analysis not just of net fiscal contribution by different cohorts, but potentially encompassing private economic transfers between generations.166
93.There is a dearth of reliable and comprehensive information about the intergenerational distribution of public and private resources. Greater awareness of the intergenerational implications of decisions would make for better policy. We recommend the Government make available the necessary information and resources to enable updated research estimating the balance of fiscal contributions and withdrawals by different generations over their entire lifetimes to be carried out. We further recommend the Government undertake a forward-looking assessment of the intergenerational distribution of private income and wealth.
Securing the intergenerational contract
94.We heard cautionary evidence that the experiences of successive generations should not be solely reduced to net financial transfers. Both the Academy of Social Sciences and the IFS noted that today’s young benefit from improvements in areas such as healthcare and technology that were not available to their forebears.167 Later Life Ambitions told us:
No two generations have the same experience–technology, the vagaries of history, changing economic circumstances all shape a generation’s experience. Nobody would advocate rationing for today’s children because it would only be fair to those who were children during the Second World War any more than they would suggest students who enjoyed grants in the 1960s return them to the state as a courtesy to young people paying student fees.168
Saga pointed to the “dour” living conditions of the post-War period, in which “mobile phones and computers were effectively science fiction”. By contrast, young people today could enjoy central heating, household appliances and “a kaleidoscope of entertainment available inside and outside the home”. The society enjoyed by the young had been “endowed to them by those working generations before them”.169
95.Nevertheless, the intergenerational fairness debate risks becoming characterised as a battle between generations. Major books on the subject have set out to show “How the Baby Boomers Took Their Children’s Future - And Why They Should Give it Back” and “How Britain Bankrupted Its Youth”.170 Baroness Altmann told us that she was:
quite exercised by the undercurrent of intergenerational conflict that seems to have grown up over recent times, and we are in a society in which we want intergenerational cohesion.171
The National Pensioners Convention warned against “creating a division between young and old and encouraging a phoney war between the generations”.172 We even heard suspicions that the intergenerational fairness debate is intended to drive a “race to the bottom”, pitting young and old in a contest for resources whereby difficulties encountered by one group are used as a reason to cut entitlements for others.173
96.We began this Report looking at polling evidence of intergenerational concern. Lord Willetts explained:
Pensioners do now worry about their kids or grandkids [ … ] younger people do not resent money going to their granny. The polling on that is quite interesting. Younger people are tougher on working-age benefits than they are on pensioner benefits.174
Independent Age, a charity, pointed out “the lack of statistical evidence of intergenerational resentment of any kind.”175 A 2013 report by Demos, a think tank, assessed generational attitudes to the welfare state using survey data and focus groups and found “a remarkable degree of cross-generational solidarity”. The priorities of different generations for public spending were motivated not by generational self-interest but by a common desire for the system to support those most in need and to honour the contributions that older people made throughout their working lives”.176 These findings were echoed by the ‘Citizens’ Jury’ convened earlier this year by PwC, a professional services firm, to look at intergenerational fairness:
The jury was clear that a problem for one generation is also a problem for another: younger generations are concerned about issues that would adversely affect their parents and grandparents, while older generations worry deeply about the challenges for their dependents. They were clear that all generations need to take responsibility for addressing intergenerational differences.177
97.A recurring theme of our evidence was “fault” and “blame”. Witnesses told us that baby boomers were being blamed for the difficulties younger people face in the housing market, simply because they happened to buy houses that appreciated markedly in value.178 We agree with the National Pensioners Convention that any such an assertion is nonsense.179 We also agree, however, with the Intergenerational Foundation that though baby boomers are not to blame, they did enjoy advantages that are not on offer to their successors.180 We concur with the Beth Johnson Foundation, a charity, that it is necessary “to change the rhetoric from a ‘blaming game’ into a real intergenerational conversationgenerations working together to solve any issues that exist, not pitting them against one another”.181
98.Our current focus on imbalances between generations should not detract from the important issue of disparities of wealth and opportunity within each generation. The generational perspective is one of many that need to be considered in the formulation of policy to ensure a cohesive society that works for everyone.
99.The intergenerational fairness debate should not be conducted in divisive or adversarial terms. We reject any notion of intergenerational conflict and do not accuse any particular generation of stealing from their successors. Baby boomers acknowledge the pressures faced by later generations. They are concerned for their children’s and grandchildren’s prospects and already provide support where they can. In turn, younger people are concerned for the welfare of their parents and grandparents and want to ensure they enjoy a decent retirement. It is not the fault of baby boomers that the economy has become skewed in their favour. But the absence of fault does not obviate the need for policy action. The recommendations in this report are intended to strengthen the contract between generations that is at the heart of our society.
164 John Hills, ‘Distribution and redistribution’, chapter 8 in Inequality and the State, OUP, 2004; analysis reproduced in John Hills, Good Times Bad Times: The Welfare Myth of Them and Us, Policy Press, 2015 ch 13 fig 3.13.
170 David Willetts, The Pinch: How the Baby Boomers Took Their Children’s Future – and Why They Should Give It Back, 2010 (2010); Ed Howker and Shiv Malik, Jilted Generation: How Britain Has Bankrupted Its Youth (2010)
176 Duffy et al, Generation Strains, Demos/Ipsos MORI, 9 September 2013
177 Intergenerational fairness - a citizens’ view, PwC/Britain Thinks, February 2016
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4 November 2016