A shorter version of this article appeared in The Times on October 4th 2021, written by Lord Willetts, President of the Resolution Foundation.

 

It is more than ten years since I published The Pinch, setting out how huge intergenerational injustices were opening up across Britain. Or to use the more provocative wording on the cover, how baby boomers took their children’s future – and why they should give it back.

Since then others have produced important works about the difference between the generations in the UK. The latest is Generations by Bobby Duffy. He argues that there are not wider cultural gaps between parents and their children. I am sure he is right on that – the big shift towards more liberal attitudes occurred with the Boomers in the 1960s and since then the generational gap has been much smaller . Indeed there is something in the Ab Fab meme– young people are so much more serious-minded than we Boomers were when we were young.

None of this however changes the reality of  a big and growing economic gap between the generations.  For example Bobby  Duffy cites Resolution Foundation evidence that Millennials are around half as likely to be homeowners than generations born only a couple of decades earlier.

Intergenerational fairness has risen up the agenda in recent years, but it has been harder to take the action needed to bridge the divide. We hear a lot, rightly, about levelling up the regions of the UK but far less about levelling up the generations.

The proposals on social care did make some modest steps in the right direction. At one point it looked as if the measures would be funded simply by increases in conventional national insurance which really would have been a direct generational transfer. But then the Government decided the levy will also be paid by working pensioners who do not pay employee national insurance. And the levy is to be applied to dividend income so at least there  is to be a contribution from owners of assets who are disproportionately old.  

There is however one big issue which is getting worse and at some point is going to have to be addressed – Council Tax. It  is based on property valuations from 30 years ago and is deeply regressive.  Lower value properties pay much more proportionately than high value properties. The system is particularly hard on young people, who are renters and dreaming  of owning a home of their own but still pay the tax. 

There is a way to fix the council tax problem. Support is growing for replacing council tax and stamp duty with a proportional property tax. Previous research has shown that a Proportional Property Tax set at about 0.5 % of a property’s value would deliver lower bills for three quarters of households, while reducing them to zero for renters.

Now, new research from the Fairer Share campaign shows it would also pave the way for the release of many thousands of extra homes for young people and families who need them. In the most optimistic scenario, almost 600,000 homes would be released within five years of such a tax being introduced to replace the other two taxes. Of these it is estimated that around a quarter of a million would be one and two bed homes suitable for first-time buyers. A similar number would be three bed homes for young families to move into.

If the generation gap is not to widen further in the years ahead then politicians cannot afford to ignore these kinds of policies. We need a massive boost to home ownership. When I updated The Pinch in 2019, I said that political parties should use the upcoming election to start healing these divides with a policy programme that appeals to and benefits young and old alike. 

At next week’s Conservative party conference, we will hear more about how the Government’s levelling up agenda will attempt to close Britain’s deep-rooted prosperity gaps. The challenge is ensuring that the levelling up agenda also goes some way to closing the widening generational gap in the UK. A reform of council tax contributes to both sorts of levelling up. It eases the burden of tax in areas with more low value properties and it also eases the burden on young people especially renters. Of course there is tricky politics as some people have to pay more. But they are outweighed by the numbers who pay less. And we end up with a system which helps the very groups Tories know we have to win over. 

 

David Willetts is President of the Resolution Foundation. A second edition of his book The Pinch was published in 2019.