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Why it’s time to stop the generational jihad

15 March 2013

12:30 PM

15 March 2013

12:30 PM

The ‘clash of generations’, depicted above by Anton Emdin, was the bestselling issue of The Spectator last year. It’s a new and potent force in British politics: the idea that the young will end up having to foot the NHS and care bills for the old: the working-age will have to support the pension-age as they sit in their hugely valuable houses and run up NHS bills. There is talk about ‘intergenerational fairness’, one of the more sinister ideas to emerge of late, and one worth rebutting. I look at this in my Daily Telegraph column today, which has drawn a response from the author of that cover story, The Economist’s Daniel Knowles. Here are my main points:

1. Oh my God, we’re all going to live. The biggest change to society in my lifetime won’t be anything to do with politics, or even economics, but ageing. People will live substantially longer than their parents, and be mentally alert and physically active to a far greater stage. It’s an odd thing to panic about, but politicians do. Mainly because the welfare state was designed for a system where there were five working-age people for every pensioner. By 2030, it’ll be more like three working-age people for every pensioner. You can see this as a time bomb — if you use the old definition of pensioner. Which, I’d argue, is the main error made by the advocates of a age clash — or, as I call them…

2. The generational jihadis. David Willetts’ book, The Pinch, vividly portrayed the idea of a clash of generations. Its subtitle was: ‘How the Baby Boomers Stole Their Children’s Future — and Why They Should Give It Back’. Shiv Malik and Ed Howker (the latter of this parish) took this thesis on with a brilliant and influential book, Jilted Generation. Daniel Knowles has been writing about this (his Spectator piece is here). Fears of an emerging gerontocracy (ie, oppressive rule by the oldies) can be traced back to a 1996 New York Times magazine piece by Lester Thurow, which had this to say:-

 ‘Universal suffrage. . .is going to meet the ultimate test in the elderly. If democratic governments cannot cut benefits that go to a majority of their voters, then they have no long-term future….In the years ahead, class warfare is apt to be redefined as the young against the old, rather than the poor against the rich’

You can imagine the left lapping this up. But many on the right seem taken by it too. Tim Montgomerie wants a wealth tax.  Willetts himself writes in terms of the young being poor because the old are rich. I agree with them that the young have been dealt a horribly bad hand. But you can’t blame this on the old — they did not ‘steal’ anything from the young. Chiefly because…

3. The asset boom was NOT theft. Yes, the oldies have found their property worth staggering amounts. Today’s young ones need to find about £10,000 post-tax for a deposit. Graduates are staying at home for longer than ever, and this compounds social inequality. But this can be blamed not just on absurd planning restrictions but on the ‘easy money’ policy of the Brown/Osborne era. When mortgage rates halve, people’s budgets rise — as do housing prices. The market is hugely distorted by QE right now, and the funding-for-lending is making mortgages cheaper still. I imagine that, in 1988, a Japanese graduate would have despaired at ever being able to afford a property. Things changed there, and they might do here. The asset boom is not a permanent asset shift, but a freak economic event that may be reversed sooner than we think.

4. The over-65s are NOT economically useless. Daniel Knowles says in his rebuttal that just 9 per cent of them work. True — but a decade ago it was 5 per cent.

It doubled in the last decade, and may double in the next. This is because the over-65s are healthier, more alert and — crucially — desired by employers. Also ‘over 65’ is a category that includes centenarians. Zoom in on men aged 65-69 and a quarter of them are still working. Paying taxes.

That 9pc of all over-65s are working does not mean that “91pc…are at home, pottering around the garden,” as Knowles suggests. This week’s Lords report shows that a third of them do unpaid work – a boom in pensioners could mean a veritable windfall for Britain’s civic life. And for those who want to do paid work, a boon for our economy. This matters because…

5. These energetic over-65s will help pull Britain out of this recession. Look again at the above graph, and you’ll see something missing: any hint of a recession. The crash did not affect demand for the over-65s. This challenges the Keynesian idea that the great recession is simply the result of collapsing demand (if it was, all age groups would be affected). And it throws weight on the other theory: that supply of workers is the issue, not the supply of jobs.

As Professor Casey Mulligan is arguing in America, the trajectory of this recovery suggests that the economy will grow if you create the incentives for people to work. The over-65s have larger personal allowances (until April), so do more work tax-free. That they are increasingly able and keen to work is itself an economic production factor. So yes, they are a small share of the overall workforce (1-in-30 workers is over-65, up from 1-in-60 a decade ago). But they accounted for a fifth of the employment rise that David Cameron likes to boast about.

6. Ministers still view the over-65 with a mixture of condescension and fear. The oldies vote, most under-30s don’t. (According to Ipsos MORI, turnout among over-65s in 2010 was 76pc but just 44 per cent for the under-25s.) This leads to absurdly expensive promises sprayed around at election time: protecting free bus passes, a ‘triple lock’ on pensions, etc. They are offering bribes that the pensioners aren’t even asking for. As Scott Davidson recently demonstrated  in Parliamentary Affairs, the oldies do not vote a a block.

The bribes to the over-65s simply an expression political panic, not gerontocratic pressure. And the bribes are simply unaffordable at a time of cuts. Jeremy Hunt refers to the ‘scandal’ of people selling their homes to pay for their care. As Philip Johnson argued in the Daily Telegraph: why is it a scandal if they sell their home, or any other asset, to pay for their future needs?

7. The generational jihadis have a point: protecting pension spending means the students get it in the neck. Why should the state pension have risen far more quickly than the average salary? The triple lock is hugely expensive: there’s about £100 billion of pension spending, given a needless and hideously expensive ringfence by Osborne. This will pile ore pain on working-age benefits, police, students etc.

8. So it’s time to stop treating the over-65s as charity cases. And that means cutting down on charity. George Osborne’s spending review would have been far less brutal had it not been due to his ring-fenced benefits for the pensioners. It’s time to restore the link between pensions and earnings, the bus passes aren’t really justifiable. The winter fuel allowance needs to go: there are better ways of getting help to pensioners who need it, especially the 22,000 who die of the cold each winter.

9. Meet Albert Billington, the future of Britain. He recently celebrated his 90th birthday at work at B&Q, he started there after retiring as a print worker. Go to Tesco or M&S, and you’ll see many more people like him. They are future of the workforce. And it’s a good thing because…

10. A ‘greying’ Britain is something to celebrate, not lament. I was once at a conference in The Scotsman when one of the news editors came in excitedly and spoke about a positive story from Glasgow: it had been named the youngest city in Europe! All we tended to get from the other side of the M8 were crime stories. For a while, we spoke about how we’d make this into a spread about a vibrant cosmopolitan magnet for young people until one of the other guys pointed out the obvious flaw: when they get old, they die. Glasgow has the worst life expectancy in western Europe, that’s why it’s average age is so low. The converse is true: a ‘greying’ society is a prosperous one. And the over-65s will become social and economic assets, in way our policymakers struggle to imagine.

So let’s not panic about Britain getting older: it means we’re healthier and more prosperous than ever. As problems go, it’s a good one to have.

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