Economic statistics will never fully capture the extent of the sacrifices of Britain’s youth during the pandemic. For a generation of students and pupils it was a lost chance to make friends, explore who they are and, gradually, become adults — as well as to learn, in person. In the face of the deaths in the broader population, it is easy to dismiss as frivolous the setbacks of those who missed partying, travelling and dating during the long months stuck inside but these are still years of carefree youth they will not get back. What is more, most of these privations were primarily to protect those from older generations, the most vulnerable to the coronavirus.
It is therefore disappointing that through its choice of tax and spending priorities the British government has called on the young to sacrifice even more. Chiefly the government is freezing the income level at which graduates will be asked to start paying back their student loans. Inflation will therefore draw many, not very well-paid, graduates into repayment — equivalent to an increase in income tax of around 9 per cent a year. A combination of such “stealth taxes” and the increase in National Insurance mean that the Intergenerational Foundation, a think-tank, estimates the disposable income of a typical 27-year-old graduate will fall by close to 30 per cent a year as a cost of living crisis looms.
The Financial Times called for a New Deal for the Young last year, focusing on jobs, education, pensions, housing and taxation. Many of the contributing factors predated the pandemic — rising asset prices, for one, that priced young people out of home ownership. Most have, however, only intensified. House prices have reached new record highs, for example. Moreover, while the recovery in the UK jobs market has been strong and there is now even talk of labour shortages in some sectors, average real wages are still declining. For young Britons this is a familiar story — from after the 2008 financial crisis and the aftermath of the Brexit referendum — of missed opportunities and a loss of lifetime earning power.
Stories of intergenerational strife can be overdone. Young people do not want to see older generations driven into penury and the rise in National Insurance, intended to fund social care and clear the post-pandemic backlog in the NHS, will be welcomed by some as a necessary step in ensuring that their parents and grandparents have dignity in their old age. A rise in income tax, however, would be more progressive — taking from higher earners at a greater rate — as well as applying to the incomes of those who have retired. In the longer run, the structure of the tax system should be reconsidered.
The combination of declining wages, higher taxes and rising house prices — supported by demand subsidies such as the government’s help to buy equity loan scheme — will put the economic security of home ownership further out of reach for many. Responses such as taking a risky punt on cryptocurrency or choosing not to have children are understandable reactions, but they represent a failure of a decade of government policy. Higher interest rates, while they may reduce house prices — or more likely just moderate the rate of increase — are intended to reduce the rate of wage growth and dampen the labour market on which all but the richest young people depend.
It is far past time for the government to heed calls for a New Deal for the Young. Justice alone, given the sacrifices involved in protecting older people during the pandemic, calls for more to be done to heal the compact between the generations: the young cannot keep being asked to foot the bill.