COVID-19 has amplified the crisis that was already facing young people. After all they have sacrificed, their futures must not be ignored
There is a risk that the struggles of young people will be blamed solely – and wrongly – on the pandemic. The Intergenerational Foundation’s new report calls for policy shifts to avoid a legacy of long-term economic scarring while balancing our intergenerational contracts
We need to thank young people for all they have sacrificed during COVID-19. Right from the start of the pandemic, our younger generations have sacrificed their jobs, incomes, educations, homes and even their mental health and personal liberties in order to protect older people from a virus that, in physical health terms, affects young people the least. They have stocked the shelves, manned the tills, delivered food, volunteered in hospitals and the community – and stayed at home.
Yet instead of thanking these young people, policymakers appear intent on asking them to disproportionately carry the £400 billion cost of pandemic spending through higher general taxation and higher student debt repayments – which is hardly a fair intergenerational contract.
As the Intergenerational Foundation (IF)’s 10-year anniversary report, Left Behind: A decade of intergenerational unfairness, makes plain, in socioeconomic terms the young have already suffered disproportionately compared with other generations over the past decade, and the UK Government has already targeted the young with higher taxation.
Now, while the intergenerational contract between young and old people has held up firmly during the pandemic, we fear this contract will not be reciprocated as the country slowly recovers.
Why young people have been so hard-hit by COVID-19
The multiple, interlinking negative impacts of COVID-19 on young people throughout the UK are stark. Three in every five job losses were from people under the age of 25; the highest number of Universal Credit claimants were among the 25–34s; and this cohort has also comprised the highest numbers of people on furlough throughout the pandemic.
The 2020 Stamp Duty Holiday – which was intended to avoid a housing market recession and keep the building industry alive – merely overheated an already hot housing market and caused a huge surge in house prices, removing the dream of homeownership even further away from the young. Meanwhile, younger renters, who were furloughed or lost their jobs struggled to pay their rent. In the private sector, one in seven renters aged 18–24, and one in 10 aged 25–34, had gone into rent arrears by the end of 2020.
Unsurprisingly, the pandemic has also had an adverse impact on young people’s mental health, with adults aged 16–29 being the age group most likely to report higher levels of anxiety and feelings of loneliness, as well as lower levels of happiness and life satisfaction.
The decade of neglect that went before
However, it is too simplistic to blame the challenges facing our young people solely on the pandemic – they should not be labelled as ‘Generation Covid’. The global financial crisis of 2008, followed by a decade of austerity, low interest rates, stagnating wages, low productivity and low GDP, have all conspired to reduce the prospects of younger generations at a time when our population is ageing rapidly and putting increasing pressure on the old-age dependency ratio.
The IF’s research has found that many UK government policy decisions over the past 10 years have directly contributed to these growing intergenerational inequalities. In recent years, government spending increased for older people in many policy areas, while stagnating or declining for younger adults and children. Older generations also continue to benefit from many universal protections and concessions, while for younger adults, universal benefits which previously existed, such as child benefit or housing benefit, have either become means-tested, taxed, or are now simply not available.
So what should be done? IF is calling for three key policy responses as a priority to ensure young people are at the heart of all long-term recovery strategies.
1. Introduce future generations’ impact assessments
IF has long called for intergenerational impact assessments to be implemented on future policy. We therefore support the Wellbeing of Future Generations (2) Bill, and in particular, the recommendation that future generations’ impact assessments should sit alongside already existing Equality Act assessments.
This would require all policies to be assessed for their impacts for at least 25 years into the future, in order to mitigate any potential adverse impacts that they could have on future generations. This would build on the Welsh Act, which has already led to successes for intergenerational fairness, such as rejecting the M4 Relief Road due to its negative environmental impact.
2. Make taxation fairer for younger generations
Intergenerationally fairer methods of taxation and public expenditure, which focus more on need, rather than age, and tax unearned wealth rather than incomes, are urgently required. Here are a few policy reforms that would help to reduce intergenerational unfairness:
- Housing policies should not be introduced which encourage house prices to increase.
- Older generations should contribute more towards their own increasing longevity and now COVID-19 spending. We welcome the news that National Insurance Contributions (NICs) will be charged on those who continue to work post-retirement but the level should be the same as the working age population. Unearned income should be taxed at similar levels to income tax. NICs should be charged on rental income received by landlords, and on shareholder dividends, with Capital Gains Tax exemptions and allowances removed. IF’s previous research has calculated that charging NICs on rental income for landlords and shareholder dividends could generate approximately £24 billion in extra tax revenue, while removing Capital Gains Tax exemptions and allowances could raise up to £28 billion.
- The ‘triple lock’ on the state pension, which currently requires the government to raise pensions each year in line with either earnings, inflation or 2.5% – whichever is highest – should be removed. The UK Government’s decision to remove one of the locks on the state pension in order to prevent a rise by up to 8% in the state pension this year is intergenerationally fair, after all, younger generations would have had to pay for this rise through higher taxation.
- The student loans system should be reformed. Graduates earning over the threshold for student loan repayments currently face marginal tax rates of 41%, soon to be 42.25% following the 1.25 increase in NICs. A recent UK Government review proposed that the repayment threshold may be lowered or the repayment period may be extended in the future, meaning even higher taxation for young graduates in comparison to older workers. We already have a progressive tax system that charges more tax, the more people earn. The student loan system is a form of double taxation on the young, when most other European countries choose to invest in their younger generations’ educations. Fees should be reduced, block grants returned, along with the return on maintenance grants.
- It is also important to reform universal benefits that do not align with the state pension age (SPA), so that younger workers do not continue to subsidise older colleagues who become eligible for universal benefits even though they are still under SPA. An example would be free travel for people over 60 years of age on London Transport.
3. Put young people at the heart of COVID recovery strategies
Young people should be at the heart of the UK’s COVID-19 recovery. That means tackling youth unemployment, investing more in the prevention of mental ill health in children and young people, investing more in education, apprenticeships and training.
The young are the future economic engines of the country, and their taxes will help to support us as we age. They should not be expected to carry the enormous debts accrued during the pandemic alone. Intergenerational solidarity needs to go down the generations as much as up the generations. It would be a grave intergenerational injustice for young people, who have sacrificed so much, to also have to shoulder the burden of repaying previous generations’ pension, government spending and now COVID-19 debts, throughout their working lives.
COVID-19 has demonstrated that the government is capable of taking drastic policy actions in a time of crisis. It is now time to turn our attention to the crisis facing younger people and act to ensure that an entire generation’s prospects are not damaged irreversibly by COVID-19.
Liz Emerson is CEO and Co-founder of the Intergenerational Foundation