Auto Amazon Links: No products found. Blocked by captcha.
Chancellor Rachel Reeves is preparing a Budget that is likely to emphasize the necessity of increasing taxes to manage the UK’s national debt effectively. One argument supporting this approach is that controlling public debt safeguards younger generations’ financial futures. If the debt were to surge considerably, it would primarily fall upon younger taxpayers to cover the related interest payments, effectively resulting in higher taxes deducted directly from their earnings.
Young people, particularly those in Generation Z, defined as those born between 1997 and 2012, have already faced significant economic challenges over the last decade and a half. Cuts to benefits and steep rises in university tuition fees have strained their finances. Additionally, recent cohorts have had a far harder time purchasing homes compared to earlier generations, reflecting increasing barriers to entering the housing market. Despite these hardships, political leaders, including the Chancellor, remain committed to maintaining the triple lock on the state pension. This policy guarantees that pensions rise annually by the highest increase among average wages, inflation, or 2.5%.
There is increasing debate about whether current fiscal policies disproportionately benefit older pensioners while placing a greater burden on younger people. The triple lock, in particular, is seen by some as a driver of growing public spending and national debt over the long term. The UK’s national debt currently hovers near 100% of GDP, but projections by the Office for Budget Responsibility (OBR) warn it could more than double, exceeding 250% within the next fifty years if no changes are made. The OBR highlights that the ageing population is a key force behind rising costs, as increasing numbers of retirees drive government spending on healthcare, social care, and pensions higher.
The demographic shift is stark: the number of people aged over 65 is expected to increase from approximately 13 million today to 22 million in 50 years, escalating the ratio of retirees to working-age people significantly. Although the state pension age, currently 66, is likely to be raised for those born after 1990 to encourage longer workforce participation, the pressures on public finances are expected to persist. Since 2010, government policies have tended to favor older generations financially, with pensioners receiving an average gain of £900 annually, while younger people effectively lost £1,400 a year, mostly due to the faster increase in state pensions driven by the triple lock compared to wages, and cuts to working-age benefits like housing support and universal credit.
Looking ahead, the OBR projects that the triple lock will continue inflating state pension costs, increasing from 5% of GDP today to nearly 8% by 2070, which translates to an additional £60 billion in current terms. These extra expenditures will ultimately be funded by the taxes paid by working-age people. How the upcoming Budget affects different generations will largely depend on which taxes are raised and what benefits remain protected. For example, higher taxes on valuable property would mainly impact older people, who generally hold more housing wealth. Pensioners do pay income tax but are exempt from employee National Insurance contributions, a change that means younger workers feel more burdened. The increase in employer National Insurance introduced in October 2024, linked to Chancellor Reeves’ first Budget, has been reported to slow hiring, affecting younger workers disproportionately.
All taxpayers share an interest in reducing the debt relative to the economy’s size. However, borrowing serves not only to cover immediate costs but also to invest in long-term infrastructure projects critical for growth, such as road and housing development. Some economists caution that cutting such investment out of fear of rising national debt might harm younger people’s prospects instead of helping them. Although the triple lock potentially offers future benefits to today’s younger generation when they retire—and polls suggest broad support among 18 to 49-year-olds for maintaining the policy—many experts argue for a fairer balance in fiscal policies that better address the needs of all age groups
Read the full article from The BBC here: Read More
Auto Amazon Links: No products found. Blocked by captcha.