Young people in this country have a raw deal. They were locked up at the worst possible time of their lives because of a virus that posed no threat to them.
After emerging from lockdown, it became clear that they would spend their lives paying off the debts Britain had incurred in those careless months.
Then, as if things weren’t bad enough, we threw away the invaluable benefit of a flexible labor market, making it much harder for them to find work.
These are real and serious complaints. But the way to deal with them is not to beat up older people; it is to take the burden off the young.
The way to achieve intergenerational justice is to not burden older generations so that there is equality of suffering. Intergenerational justice will happen when younger people can realistically find good-paying jobs and have a chance at buying a decent place to live.
The Institute for Public Policy Research (IPPR) wants to tax the elderly more. It says we need to reform a tax and spending regime that is ‘heavily biased towards taxing work and younger earners’.
There is nothing wrong with that: the system is indeed so skewed. But the IPPR’s proposed solution – a property tax that would be set at a percentage of the value of your home and replace council tax – raises questions.
Our taxes are already higher than at any time since the demobilization after World War II. To find higher overall proportional taxation in Britain we have to go back to 1947, when the only heat source most people had was coal, when indoor plumbing was a luxury, and when rationing allowed us one fresh egg a week.
Taxing older people more and setting up the full intrusive mechanisms needed to assess the value of their homes will do young people no favors, writes Daniel Hannan.
How, in the name of all that is holy, did we come to take for granted that, in a peacetime economy, the answer to our credit crisis is to raise taxes to the levels they were when we were still in a life-and-death struggle against Nazism?
Are we seriously pretending that we don’t have to cut spending instead – at least back to levels before the supposedly one-off emergency spending due to the lockdown?
The way to help voters of all ages is to stimulate the kind of growth levels we took for granted in the 1990s or early 2000s, before the surge in state spending.
Economic growth will ensure that young people can get decent jobs and thus pay the pensions of retirees. We will not achieve growth through higher taxes and spending.
Redistributive taxes are doubly bad for productivity. If you have to give half of what you earn to the tax authorities, you will work less hard. If part of your money comes to me as a benefit, I will also work less hard.
While raising taxes may close a one-time financing gap, it slows economic growth and makes the problem worse in the medium term.
Let’s hear no more tax increases until we reduce some of the more unnecessary spending. Don’t give me any nonsense about ‘austerity’: we have seen government spending rise from a third of our economic output in the Blair years to almost half today.
We spend more on benefits for working-age adults than we get from all income taxes. We spend millions on radio ads telling people to claim more benefits.
Instead of raising taxes and making their employment prospects even worse, we must remove the barriers that prevent young people from flourishing and drive many to emigrate.
These obstacles are very real. Youth unemployment now stands at 16 percent, while over a million 16 to 24 year olds are not working or studying. There are fewer vacancies, especially for graduates. In July 2017, 55,000 graduate vacancies were advertised. Last July there were 15,000. In July only 8,000.
Part of the problem is the increase in the employer’s share of national insurance. Reversing that increase would create an immediate shortage but would pay for itself over time as more jobs were created.
Other things could be done immediately without costing the Treasury a cent. For example, freezing the minimum wage, which prevents many employers from giving young people a first break. Or stopping the measures in the Labor Act that make it too risky to hire new staff.
We can imagine the economy as a man swaying under a heavy load. That burden consists of taxes and regulations enacted by successive chancellors in pursuit of the day’s good headlines or seeking the support of a bloc of voters.
This burden can be alleviated in several ways: by cutting regulations, especially in the area of labor law. Freezing benefits, so that people are encouraged to look for work and become net payers instead of net recipients.
Dropping the monopolistic NHS model that gives us such poor outcomes. Stop pretending that self-diagnosed mental health problems are equivalent to physical disabilities. Ensuring that the pound retains its value. Lowering taxes on savings and investments.
I don’t expect our new Prime Minister to do all these things. It is fair to say that none of his predecessors did that. But he can certainly do some. For the only alternative is to tax the burden higher and higher, and pile on more and more taxes which, by the law of diminishing returns, produce less and less revenue, until the man carrying the burden collapses under its weight.
Young people have every reason to feel that they are not getting a fair chance. Even before the lockdown, they suffered from our unique national reluctance to build houses, or even any kind of infrastructure. The way they were treated after March 2020 reminded me of Kipling’s statement about the ‘angry and deceived youth’.
But taxing the elderly more highly and setting up the full intrusive mechanisms needed to assess the value of their homes will do young people no favors.
The idea of sending inspectors to see how much your house is worth is reminiscent of Pitt the Elder’s great speech against the cider tax in 1763:
‘The poorest man can defy all the powers of the Crown in his little house. It may be weak – the roof may shake – the wind may blow through – the storm may come in – the rain may come in – but the King of England cannot get in! – all his strength dare not cross the threshold of the ruined dwelling house!’
No, if we want to help the younger generation, we have to do it directly. Lower their taxes. Build more houses. Abolish regulations that make it more difficult for them to find work. Stop the nonsense of sending half of our school leavers to university courses, the costs of which in many cases they will never be able to repay.
Do these things and we will make this country a country where ambitious young people work, build and prosper. Our deficit will fall, our economy will become stronger and who knows, we may not have to cut state pensions.
Daniel Hannan is director of the Institute for Economic Affairs.
