Intergenerational Fairness in Government Policy

Lord Young of Cookham Excerpts

Thursday 26th October 2017 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, it is a pleasure to respond to this debate as the Minister in the Government who happens to have more experience of more generations than any other. I thank the noble Baroness, Lady Smith, for selecting this subject for debate and for moving it so well. We have had an astonishingly good debate—non-partisan, apart from a few jibes from the noble Lord, Lord Hunt.

Any debate that has in its Motion “fairness” and “across all departments” of government gives the Minister replying a rather long frontier to patrol. I will try to address as many points as I can, but I may be defeated by the clock. In response to the point made by the noble Baroness, and underlined by the noble Lord, Lord Hunt, about looking at the long term, it is perhaps better to debate this subject in the upper House, where we are not so focused as individuals on the next election and can afford to take a slightly more detached and long-term view.

I shall first try to put this debate in a broad context by talking about the role of government in addressing fairness. The Government have a responsibility to address inequality between the rich and the poor. Major disparities between households are not only intrinsically unfair, but lead to a fractured and unstable society. Although there is a political debate in this country about how progressive Governments should be, about the extent to which the promotion of equality should erode the freedom of the individual—the noble Lord, Lord Wallace, implied that taxation should be higher than it is—all parties subscribe to progressive taxation on incomes and on capital. That debate has been about what I call horizontal equity—looking at households across the spectrum and reducing disparities between them, levelling up where possible rather than down and using the proceeds of economic growth to do so.

Our debate this afternoon has been about something different: fairness between generations—looking at cohorts up and down, as it were, rather than across, and identifying unfairness. This is a much more complex issue for Governments to address, for reasons that we have heard in the debate, because whereas poorer people do not necessarily become rich, younger people necessarily grow older. Also, older people give money to their younger generation—we heard this from my noble friends Lord Tugendhat, Lady Altmann and Lord True, and from the noble Lord, Lord Filkin, on the Cross Benches—and support is often given in kind the other way round, to an extent that rich people do not give money to poor people. This extent of intergenerational exchange and transfer adds an extra dimension to the traditional debate.

Carried out insensitively, addressing intergenerational equality could have the perverse consequence of a particular generation missing out as policies change, or, as my noble friend Lord Willetts explains in his excellent book, a particular generation benefiting at the expense of those who went before and follow after. A related issue in this context is the extent to which today’s generations can borrow to enhance their own lifestyles at the expense of potentially depressing those of the generation to follow.

The good news about our debate today is that the temptation to portray this as pitting one generation against each other has been resisted. This is not a zero-sum game, because, as I explained, people move from one cohort to another. The role of the Government should be, as my noble friend Lord True suggested, one of clearly targeted intervention to address specific problems and, as the Prime Minister has said, to try to build a country that works for everyone.

We need to approach this with a view to bringing people together rather than prising them apart. Nearly all those who contributed agreed with that premise. We have this debate against a background of a social contract, mentioned by my noble friend Lord Willetts—that the next generation will be better off than the one that preceded it—coming under some tension.

Much of our debate has focused on the issues facing the younger generation, and before I look at this subject by subject, I want to pick up a general point made by several noble Lords. Yes, there are real problems for today’s generation. The right reverend Prelate the Bishop of Salisbury said that hope was being sapped, but my noble friend Lady Jenkin put a slightly different perspective on it, because in some ways, the prospects for young people today are actually quite bright. Theirs is a generation that is healthier, with far greater access to higher education than their parents and grandparents, with record numbers—particularly from disadvantaged backgrounds—going to university, life expectancy up, youth unemployment falling, rates of smoking, alcohol consumption, drug abuse and teenage pregnancies down and with access to affordable travel overseas, which was denied to earlier generations. As my noble friend Lord True said, thanks to technology, there is access to information, music, entertainment and social exchange to an extent unimaginable 25 years ago, so there is something to put on the other side of the balance sheet.

I take on board the suggestion made from two Front Benches that there should be a Select Committee to look at intergenerational issues, and of course I will pass that on to the usual channels. I fear that I do not read the Daily Mail since it launched a fairly serious attack on me back in the 1980s, I think, and it is not a paper that is in the Government Whips’ Office, so many of the recent exchanges have passed over me.

Housing is one of the most pressing issues facing the younger generation, a point well made by the noble Lord, Lord Best. The simple truth is that, as a country, over decades, we have not built enough homes. We had a good debate on housing last week and there was consensus on that point. As a result, the number of homes has not kept pace with our rising population, fuelling soaring house prices and also rents, as many noble Lords have mentioned. The Council of Mortgage Lenders predicts that by 2020 only a quarter of 30 year-olds will own their own home, as my noble friend Lord Willetts said. By contrast, more than half the generation currently approaching retirement were homeowners by their 30th birthday. We are seeing an entire generation effectively locked out of the housing market, with all the implications that this has for opportunities to find work, start families, put down roots and acquire capital and security, as mentioned by my noble friend Lady Stowell.

That is why we have this ambition to deliver 1.5 million homes by the end of 2022. At a time of significant restraint on public expenditure, with difficult decisions being taken right across Whitehall, we committed £25 billion to housing in the previous Parliament and recently announced another £12 billion. That is evidence of our determination to make progress. We need to build more homes, faster and in the right place and, whether the homes are to buy or rent, ensure that they are more affordable.

We have to make more land available, particularly land owned by the public sector, and encourage local authorities to build more homes, including homes for rent. One of my noble friends wanted more incentives to save, but in a way that was not wholly accessible. I think that the recently introduced Help to Buy ISA ticks that box, offering people an opportunity to save for their first home.

On home ownership, as I said in our debate last week, our Help to Buy equity loan helped more than 134,000 households to buy a new-build home, and 81% of those were first-time buyers—39% had a total household income of £40,000 or less and 90% had a total household income of £80,000 or less. Many young people can afford the repayments, when it comes to home ownership, but not the deposit. That is why the Help to Buy equity loan can address that.

My noble friend mentioned renting. We are banning unfair letting fees, capping deposits and providing landlords with incentives to offer longer tenancies, and we are ensuring that all landlords are members of a redress scheme to speed up dispute resolution. We are also making sure that all letting agents are registered. We recently announced another £2 billion for the affordable homes programme, increasing the budget to more than £9 billion. Yesterday, the Prime Minister announced that local housing allowance rates in the social rented sector for general and supported housing tenants will not go ahead. There was quite a lot of comment about making better use of the housing stock. The noble Lord, Lord Best, the noble Baroness, Lady Greengross, and others emphasised the need for that. I was very interested in the proposals put forward the noble Lord, Lord Best.

Local authorities should have clear policies for addressing the housing needs of particular groups, including older people. Given the importance of this issue, the DCLG is consulting, as part of its review on planning the right homes for the right place, and the consultation ends on 9 November. Through the Neighbourhood Planning Act, we are introducing a new statutory duty on the Secretary of State to produce guidance for local planning authorities on how their local development plans meet housing needs for older people. Progress is being made on that front.

On the economy, there were many recommendations for the Chancellor—some for cutting taxes and some for raising them—and I shall pass those on. Some may feature more in thoughts for our manifesto than in immediate plans, given the commitments that we have already given. We want to provide economic security for people at every stage of their life. We have a progressive taxation system: the top 1% of income tax payers are paying more—28% of all income tax, up from £34.5 billion to £46.7 billion in 2014. With the vast majority of taxpayers kept out of capital gains tax, we have raised £8.4 billion from those who have made significant gains. That is why our rules on inheritance tax, mentioned by a number of noble Lords, strike a balance between ensuring that the average family can pass assets on, while at the same time facilitating redistribution, so that wealth is not unfairly concentrated. That is why we are continuing to take action on the deficit.

Our national debt is forecast to peak at around 90% of GDP by the end of the year, which is the highest it will have been in 50 years. Like the noble Lord, Lord Hunt, I was very interested in the intervention from the noble Lord, Lord Turnbull. I was slightly surprised by his remarks, as a former Permanent Secretary to the Treasury, that national debt should go higher. When I was briefly a Minister in the Treasury, the culture was very much the other way. However, we should look at the case that he made, although there is not only his view or my view about an acceptable level of borrowing by the Government; the international money markets may take a slightly more cautious view. I think that it was the Governor of the Bank of England who said that we are to some extent dependent on the generosity of strangers. In the meantime we are trying to get debt falling and to increase economic resilience.

Youth unemployment is at a near record low. There are a record number of people in work, and there are around 750,000 job vacancies, meaning greater opportunities for all. We need to focus on ensuring that, once people are in work, they see their wages rise and take home more of their pay package. I thought that my noble friend Lady Jenkin made a very important point about the changing nature of the job market as we look ahead, and how young people have to be prepared for that. We have increased the national living wage to £9 an hour by 2020, and cut income tax for over 30 million people.

Supporting people in retirement after they have worked hard all their lives continues to be a priority, especially as it can be more difficult to increase your income once you have retired. As the noble Baroness, Lady Greengross, said, we want this country to be the best place to grow old. My noble friend Lord Tugendhat said that it was time to think again about the triple lock, although that is more a matter for the next manifesto than an immediate option.

Under successive Governments, we have seen the percentage of pensioners living in poverty fall dramatically. In the 1970s, 40% were in poverty; today, that figure is 16%, a success of the policies of some 30 years ago to which my noble friend Lord Tugendhat referred. We have seen big rises in the living standards of pensioners. However, as my noble friend Lady Altmann said, it is important not to generalise. More than 1 million current pensioners rely solely on the state for their income. As my noble friend Lady Stowell said, quite often those are people who have had a tough time in life before they retired. That is the background to the triple lock uprating of pensions in 2011 and why we have committed to continuing it over this Parliament. For those with another income, of course, the state retirement pension is taxable.

This is not a case of robbing Peter to pay Paul. Young people will become old themselves, and today’s young workers will become tomorrow’s pensioners. However, mindful of increases in life expectancy, we are committed to regularly reviewing the state pension age each Parliament in the interests of intergenerational fairness. The first review of the state pension age, in July this year, proposed increasing it from 67 to 68 in 2037-39, seven years earlier than the currently legislated date of 2044-46, saving £74 billion by 2045-46. We are also minded, in the long run, to commit to up to 32% as the right proportion of adult life to spend in receipt of state pension. That proportion is consistent with the average spent above state pension age experienced by people reaching state pension age in the last 25 years. The 2017 Labour manifesto proposed maintaining the state pension age at 66. This would have built up a further debt of £250 billion by 2045-46, which would have to be passed to later generations.

Higher education was a major topic in our debate. For young people, one of the biggest advances in recent years has been the explosion in higher education opportunities. Graduates can earn, on average, at least £100,000 extra lifetime earnings after tax. We had various ways of presenting student finance in the debate—on one hand, from my noble friend Lord Willetts, on the other hand from the right reverend Prelate the Bishop of Salisbury. The point was made that what really matters is how it might be perceived by the students. There has been some unfairness in the time; I have only two minutes left, which means that I shall not be able to make all my points. But on student finance, the OECD’s Andreas Schleicher said in 2016 that the UK,

“has been able to meet rising demand for tertiary education with more resources … by finding effective ways to share the costs and benefits”.

On health, there has been real progress. However, on obesity, if we are not careful the next generation may not live as long as this one—and we have plans to address that.

On migration and refugees, an important issue raised by the right reverend Prelate, we transferred more than 900 unaccompanied asylum-seeking children in the UK from other EU countries, including more than 750 from France. Perhaps I could write on some of the other issues, such as those on climate change raised by the noble Baroness, Lady Featherstone. It would take me two minutes to read out my note, so I hope that the House will understand if I do not do so. The noble Lord, Lord Addington, and many other people asked specific questions—and I have the answers, but not the space to read them out.

To conclude, on a raft of issues—housing, taxation, employment, pensions, higher education and health—we are making significant strides to support people across the generations, giving young people the opportunities to get on and giving older people security and dignity in later life. The two are not mutually exclusive. We want to continue to renew the unspoken social contract—one generation helping another and being helped in turn—that has forged and strengthened our society, and renew belief in aspiration and the belief that, across the generations, our country can and will prosper.