If they don’t look out for the younger generations, society could ultimately fall apart.
Next week all ears will be on the chancellor, as he sets out a spending review – or should that be a retrenchment review? – which will take the cumulative cut since 2010 for some departments up towards a half, or even beyond.
In this context, the focus is bound to be one question: how low can you go with public expenditure, before the wheels start falling off basic services? The big shrink is undoubtedly dramatic, but it is important not to ignore the parallel shift in the shape of the state. In particular, the spending review looks set to intensify the pre-existing slide from investing in the rising generation towards spending on those in the autumn of their days. The welfare state bequeathed by George Osborne will have much less to do with the climb out of the cradle than with the slow march towards the grave.
Looking right across government expenditure on everything except debt interest (which will, of course, very largely be paid into pension funds), the Resolution Foundation thinktank last week observed how combined spending on older people and on the health service, which the elderly use most, looks set to rise from 34% of the total in 1997 to 43% by 2020. This large rise reflects a mix of factors: demographics, New Labour’s large increase in NHS funding, David Cameron’s subsequent decision to shield the service from the axe that was being swung at other departments, and the so-called “triple lock”, which ensures that the state pension always rises at least in line with earnings, and climbs more rapidly than that when pay is stagnant.
The obverse is a dwindling slice of the shrinking overall pie for two key areas of spending: education and broader “economic” expenditure on the future. This heading includes housing, something that’s in acute short supply for the young, as well as regeneration which support the next generation of jobs. Education and “economic” spending will slip from nearly a quarter of total public expenditure in 2007, at the dawn of the credit crunch, down to 19% by the end of the present decade, the Resolution Foundation calculated.
It would be wrong to predict an unalloyed victory for the greys in the spending review. The social care that the frailest elderly rely on could prove to be one of the hardest hit services of all but, then, youth services and further education have already been shredded. The overall pattern will almost certainly skew departmental spending towards older cohorts at the expense of the young, compounding the established and increasing inter-generational imbalance in social security. Pensions are automatically indexed, and topped up with protected perks such as winter fuel allowances. In contrast, younger unemployed and disabled people have several years of outright freezes in prospect, after years in which cost of living adjustments were capped at just 1%. They have had the bedroom tax to pay, all sorts of housing restrictions, and the basic rate of incapacity benefit is set to fall by around £30 every week. And all this, of course, before we get to tax credits, which the chancellor had hoped to snatch, and may still succeed in snatching, from larger families and the low-paid.
Looking beyond government spending choices to generational fortunes as a whole, the Institute for Fiscal Studies recently calculated that since the slump, and for the first time in history, average pensioner incomes have overtaken the average for the population as a whole. Pressed by the BBC recently on whether the government oughtn’t to do something about this age divide, the former chancellor and winter fuel payment recipient Ken Clarke conceded that there was “obviously a case to be made”, but also cautioned that if Osborne asked the old to lessen the load of the young in respect of tax credits, in political terms he’d “be jumping from the frying pan into the fire”.
The growing age bias is revealing itself in disparate policy areas – including David Cameron’s EU renegotiations. It is rumoured that the PM may be willing to fulfil his objective of barring EU nationals from tax credits by demanding four years of labour market experience as a qualification criteria, even though that would mean cutting out young British people in their first job. The way things are going, youth could soon be another country – and a less happy land.
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