Hunt takes from young to give to the old

Chancellor’s Autumn Statement was much kinder to pensioners than to hard-pressed 20 and 30-year-olds, reports Eir Nolsøe

‘Cohorts of young people made huge sacrifices over the two years of Covid lockdowns to keep older people safe’

‘The area where most young people would like assistance and support is around owning a home of their own’

Young people are still reeling from the “difficult decisions” unveiled by Jeremy Hunt last week. In a sobering Autumn Statement, the Chancellor revealed the biggest tax burden in 70 years after inflation climbed to a 41-year high of 11.1pc.

But while working people’s real incomes will be plunged back to 2013 levels, state pensions will rise in line with double-digit inflation.

“To the millions of pensioners who will benefit from this measure I say ‘now and always, this government is on your side,’” Hunt told the Commons on Thursday when announcing the triple lock boost. Such statements have added to the growing unease that the Conservative Party is pandering to its elderly voters while losing the confidence of the younger generation.

“Older voters are a powerful voting bloc. They vote. But you can’t just win a general election off the back of the votes of one demographic of society. You just can’t do it,” says Sir Charles Walker, a Tory backbencher who is stepping down at the next election.

“I think there is a concern shared by many [in the party] that we are almost insulating one favourite group as much as we can from the economic difficulties we’re facing now, at the expense of almost every other group.”

Sir Charles says there needs to be a “quid pro quo” for younger generations for “looking after the elderly”. Maintaining the triple lock is “becoming increasingly difficult to justify”. He adds: “We have cohorts of young people who made huge sacrifices over the two years of Covid lockdowns to keep older people safe. They paid significant career penalties, significant social penalties and many of them paid a significant mental health penalty.”

In addition to inflation-adjusted state pensions, retirees will get a £300 one-off payment from April to help with energy bills not afforded the average working person. Meanwhile, those on pension credit will also get a meanstested cost of living payment of £900.

Retired people “are getting quite reasonable support from this budget”, according to Sophie Hale, an economist at the Resolution Foundation. While they spend the highest share of their income on energy bills, they are better able to afford it than the young and tend to have higher levels of savings, she says.

Britain’s ageing population also means the NHS, which is already at breaking point, will only become more expensive to run. These bills will be footed by working people facing higher taxes through a combination of increased levies and frozen brackets.

The changes announced in the Autumn Statement mean Britain will have the highest sustained tax burden relative to GDP since the Second World War at 37.1pc. Experts say it will likely remain high, as the pressure of an ageing population, a creaking healthcare system and Covid spending weigh on public finances.

The biggest losers are the young who will miss out on earnings from lower growth and pay higher taxes for longer over their working life. In the short term, they are also much more exposed to the cost of living crisis than other groups, according to Hale. This is because of three factors: they struggle more to pay for energy bills, have fewer savings and spend a greater share of their income on housing.

Research shows that around one in five households made up of 16 to 29-year-olds have a gas or electricity meter. This means they cannot space out their energy costs throughout the year like direct debit payers. Among all age groups, they are the most worried about their energy bills, while people aged 65-plus are the least so.

“They just don’t have the savings buffer to support themselves through this winter,” Hale says. “The other thing is that they already face very high housing costs.”

Younger people are also the least likely age group to have money put aside for emergencies, while this is most common among the oldest. Seven in 10 people between the ages of 20 and 29 have less than one month’s income in savings. This is only the case among 15pc to 20pc of those aged 65 and over.

Hale says that while average rental prices have only increased 3pc so far this year, new tenancy agreements have risen more than 10pc. The increase comes as many landlords sell up rather than face stricter regulations, limiting supply just as demand has roared back after the pandemic. In London, rents for a two-bedroom flat are up 16pc in a year, the highest on record, according to Rightmove data.

Support in the Autumn Statement for tenants was limited to increasing rents for those in social housing below inflation. Many first-time buyers hoping to get on the ladder were pushed off the first step after the mini-Budget prompted lenders to pull mortgage deals and rapidly increase rates.

“I think the area where most young people would like assistance and support is around owning a home of their own,” says Sir Charles. Tory MPs need to look past complaints from their constituents who don’t want new houses in their area to deliver planning reforms, he believes.

A lost decade of growth will leave the largest scar on younger generations’ futures. Forecasts by the Office for Budget Responsibility show that the UK will enter the deepest recession among G7 countries next year, with GDP falling by 1.4pc and only recovering slowly.

The downturn will set back real incomes eroded by inflation to where they were nearly 10 years ago.

“Growth has been pretty weak since 2008. If you’re born in 1990 then essentially all of your adult life has been in this post-financial crash period, whereas earlier generations would typically have experienced earnings growth over the first 10 or 15 years of their working life,” says Tom Waters, from the Institute for Fiscal Studies.

He believes growth is unlikely to return to levels seen before the financial crisis. OBR data show that, on average, real disposable household incomes grew by 2pc a year from the mid-1950s until the financial crisis. Meanwhile, its forecasts show they will fall a record 7pc over the next two years. By mid-2028, they will only have grown by 0.5pc, on average, a year over nearly two decades, if the predictions hold true.

While there was a healthy uplift to funding for schools in the Autumn Statement, those aged 16 to 19 in further education were short changed, according to Claire Crawford, an economics professor. This will affect a generation who already had a significant chunk of their schooling interrupted by Covid and limit growth, she says.

Funding for early years education also faced a real-terms cut, which will likely limit the availability of childcare and push up the costs for parents.

All these factors mean that for many young people milestones such as buying a home, having a baby and building a nest egg will stay out of reach.