Matthew Brooker is a Next Generation Centre fellow at the Adam Smith Institute.
Since Jeremy Hunt cut National Insurance Contributions to eight per cent, the Conservatives have been accused of sticking two fingers up to Britain’s pensioners. This was a view partly promulgated by the IFS and the Resolution Foundation, both of which asserted that pensioners were the “big losers” of the most recent Budget.
You would hope that most people would find it patently absurd to suggest that we should somehow be cutting a tax for a group of people that already does not pay it. Unfortunately, however, this narrative has stuck – exemplified by Janet Street-Porter’s accusing the Rishi Sunak of hating pensioners on Loose Women.
Of course, this was seized on by Labour. In an open letter to Britain’s pensioners in the Mail on Sunday, Liz Kendall claimed that Conservative plans to scrap National Insurance would create a £46 billion “fiscal black hole.”
In what appears to be a direct response to this criticism, the Conservatives have proposed a ‘Triple Lock Plus’, or ‘quadruple lock.’ Just like the state pension, pensioners’ tax-free allowance will automatically increase in line with the highest of earnings, wages, or 2.5 per cent if the Conservatives win the election. They claim it will give pensioners a tax cut of almost £300 per year by the end of the next parliament.
I naturally support tax cuts. The tax burden in the UK is too high, and it is forecast to increase to an alarming 80-year high by 2029.
However, giving tax cuts to a group where one in five are millionaires is a bitter pill to swallow for working-age people who are being squeezed in by an unhappy concoction of high taxes, unaffordable house prices and the rising cost of living .When the Adam Smith Institute advocated for indexing tax thresholds with inflation, they hardly meant solely for pensioners.
Let’s face it, baby boomers have had it pretty good. They bought their houses when they were cheap (roughly five times earnings, compared to nine times today) in the 1970s, reached the peak of their careers in the economic boom of the 1980s, benefitted from the rapid appreciation in the value of their homes in the 1990s and early 2000s, and have received large triple-locked state pensions in retirement.
Overall, they have received roughly 25 per cent more in benefits than they put into the welfare system. The economic system has worked for them at every stage of their lives.
The recent National Insurance cuts and expanded free childcare have provided much-needed relief to Britain’s struggling young workers; the Triple Lock Plus will undo the recent positive step the Conservatives took to address intergenerational inequality.
Setting the unfairness of this proposal aside for a moment, the scheme (which will apparently cost £2.4 billion a year) isn’t even affordable. According to a new dynamic model built by the ASI, the state pension could become fiscally unsustainable as early as 2035, partly due to an ageing population and a declining ratio of workers to pensioners.
To put it another way, that could happen during the next parliament but one.
By 2040, the think tank calculated that 22.5 million will be claiming the state pension, but only 16.8 million will be working to fund it – assuming that everyone of working age is well enough to work or is employed. The crushing financial burden the state pension is already placing on 16-65-year-olds is set to get worse.
This trend will only be exacerbated by the ‘Triple Lock Plus’. When they should be doubling down on pro-growth, pro-work policies, the Conservatives have swung back to outright bribing the grey voters at the expense of Britain’s young.
The consequences are already becoming depressingly obvious: according to a recent YouGov poll, more people aged 18-29 intend to vote for the Green party than they do the Conservatives. These figures become even more stark when one considers that David Cameron’s Conservative Party won 30 per cent of the 18-24 vote and 35 per cent of those aged 25-35.
The Party must break itself out of this vicious circle of attempting to appease pensioners who will never be fully satisfied with the bungs they are given, before it eventually destroys forever any hope of winning back younger voters.
