LONDON LETTER:The middle-aged are blessed – today's elderly are poorer than they, while the young are struggling to pay bills, writes MARK HENNESSY
MARGARET THATCHER’S iron will is credited with having forced through a revolution in the United Kingdom – cutting taxes, destroying the power of the trade unions.
The reality, according to Tory MP David Willetts, is that the Thatcher era was partly made possible by the baby boom in the UK between 1947 and 1964. Because of it, when Thatcher came to power in 1979 she had proportionally few pensioners to worry about, while a low birth rate from the late 1960s meant education and the other social costs of the young could be restrained.
Today’s politicians do face demographic pressures. In 1982, the rate of the population over 50 stood at 30 per cent, but in just 15 years from now it will be 40 per cent. The median age today is five years higher than 20 years ago.
Britain’s baby-boomers – the earliest of whom bought clothes on Carnaby Street in the late 1960s and the youngest of whom were punk rockers – are now greying, but blessed with the biggest share of wealth of any age group.
Half of all property wealth is owned by those who are between 50 and pensionable age, while a roughly equal share of pension entitlements will go to the same group, who should, on average, live to be 80.
Willetts, a rare House of Commons politician comfortable with the discussion of abstract ideas, has written a fascinating book called The Pinch: How Baby-Boomers Took Their Children’s Future – and Why They Should Give It Back.
The book explains how those born between 1946 and 1966 can expect to get 116 per cent of what they have contributed in taxes during their lifetimes. In contrast, those born from 1971-1976 will get just 95 per cent.
The Golden Generation, he argues, profited from increased education spending when they were young, inflation that evaporated their mortgages and increased property values, low taxes for much of their working lives and, finally, better pensions.
Indeed, so much progress was made during those decades on pensions, Willetts argues, that nobody coming after them will ever get such rights again, since companies are now doing everything possible to row back.
Equally, the boomers enjoyed the most dramatic rises in age expectations of any generation in history, without having to pick up the tab for looking after an older generation lasting equally as long.
Willetts points out that it is fallacious to argue that the middle-aged are losing out to younger colleagues at work. In 1974, workers aged between 50 and 60 earned 4 per cent more than someone in their 20s.
Today, however, the gap between the two groups has grown to 35 per cent and it is continuing to grow because globalisation is putting pressure on wage rates for new arrivals into the labour market.
The boomers are ahead even in today’s banking bailouts, since they are the ones with the wealth to protect, while HM Treasury’s issuance of debt due to be paid in 2034 will be the responsibility of those who come after them.
The classically educated Willetts turns to lessons from ancient Greece to warn the baby-boomers that just because they have done well up to now does not mean they can be certain this will continue.
Croesus, King of Lydia five centuries before Christ, was fabulously wealthy, and once boasted of his possessions to Solon, one of the Seven Sages. Solon was unimpressed, Willetts told a London School of Economics gathering on Tuesday night. Croesus was hurt, asking Solon why he was not in awe. “Because I will call no man lucky until he is dead,” replied the sage.
In time, Croesus lost two of his children to murder and suicide; his empire and wealth disappeared later.
Quoting Edmund Burke, the noted Irish statesman who is generally regarded as the father of modern conservatism, Willetts said society was a partnership “not only between those who are living, but between those who are living, those who are dead, and those who are to be born”.
The middle-aged have been blessed. Today’s elderly are poorer than they, and getting poorer. The young struggle to pay bills. What will happen, he wondered, if the latter group refuses to pay the costs of looking after the blessed in coming decades?
Indeed, polls indicate that the winds are already turning. One fifth of those aged between 18 and 34 believe pensions should fall; 37 per cent of them believe the pension age should rise, while just 31 per cent are prepared to pay more taxes.
Predictably, those aged between 50 and 60, soon expecting to be enjoying the fruits of retirement, differ: just 13 per cent favour a fall in pensions; one-quarter favour a rise in the pension age; over half believe more tax should be paid.
“Young people are in danger of getting a raw deal,” said Willetts, who was born in 1956 and benefited from the social mobility offered by postwar education reforms. “If they do, then we’ll get a raw deal.” However, there is a central difference between the groups. The older ones vote, and therefore cannot be ignored by governments in the UK or anywhere else for that matter. The younger ones do not.