Kieran Neild-Ali, grassroots assistant
British businesses have been dragged kicking and screaming back into a nationwide lockdown. Many shops, pubs and restaurants will sadly close their doors forever. The health of Britain's economy is in a desperate state. This is also true of an entire generation of young people who have deep reservations about their futures.
We have a growing national debt of £2 trillion after borrowing over £173.7 billion between April and August just to keep our heads above water during the pandemic. Despite the tax burden being the highest in 50 years, the Chancellor is giving lukewarm indications that taxes will rise to service the debt and to allow Boris to continue to put his arms around the workers of Britain. With this further lockdown, we can expect yet more borrowing to see us through the winter, making the pressure for tax rises grow even further.
The burden of all of this will fall hard on the working age population. Yet at present, we have the worst unemployment figures in 3 years. Half a million redundancies have been planned since the start of the pandemic and job vacancies are 46 per cent lower than last year's level. People aged 16-24 are suffering the biggest fall in employment relative to other age groups. For college students and recent graduates, these figures are extremely worrying.
Although extending the furlough scheme this winter will give many employed people a lifeline, the scheme is not enough to stop struggling businesses axing staff. The Resolution Foundation found 19 per cent of 18-24 year olds who were furloughed during lockdown were unemployed in September. This paints a grim picture for Britain’s younger workers.
Resolving younger generations’ economic woes in this climate might seem like an impossible feat - but there are ways we can invest in young people and improve the overall health of the nation's finances while saving billions of pounds to stave off tax hikes. Yet more spending programmes, like the unsustainable Kickstart scheme, are targeted at young people but the costs will be inevitably paid off by young people too. We need intergenerational fairness to redress the current inequality between our young and old people. We can start by reforming the triple lock.
At present, pensions are guaranteed with a triple lock. That means pensions will always rise by whichever is higher out of inflation, earnings growth, or 2.5 per cent. No matter how desperate the situation our young workforce face, one segment of society will never feel the brunt of poor labour markets, inflation and stagnating wages. Working taxpayers are ensuring that a generation of citizens receive an income which is guaranteed to rise even if the very taxpayers funding that rise are seeing their income cut or jobs lost.
Every pensioner deserves dignity in old age, but there comes a point when as a country we must stand back and question whether it is fair that working taxpayers give billions of pounds to the treasury to ensure OAPs receive extremely generous pensions (and benefits too) while the economy is in crisis.
Apart from our recommendation to scrap employer and employee national insurance contributions to help people keep their jobs and put more money in their pocket, reforming the triple lock will make it fairer for overburdened taxpayers and young people. If given the choice themselves, I’ve no doubt that many grandparents would forgo their automatic rises to help keep their beloved grandchildren in work right now.
There is a way Rishi Sunak can let them do that. The government should replace the 2.5 per cent lock with a 0 per cent lock. It would prevent automatic and unreasonable increases while still guaranteeing the state pension doesn’t fall when earnings and inflation numbers are both negative. The pension would rise with earnings or inflation, depending on which is rising faster. When prices and earnings in the broader economy are both negative, the 0 per cent lock would mean that pensioners would still receive the same cash amount in their pensions - protecting our elderly citizens. If earnings were falling, their working age family would surely appreciate it. Furthermore, in times of deflation and falling prices, pensioners with the 0 per cent lock might actually see their money go further.
According to the Social Market Foundation, this change would save approximately £4 billion a year, giving the government headroom to dish out well needed tax cuts to galvanise the economy and boost employment opportunities for young people. All of this could be done without further piling on the liabilities of borrowing. Simply put, the Chancellor could save to spend or cut tax taxes.
The burden on working taxpayers cannot continue to grow in a time of economic hardship. Reforming the triple lock is just one area the government can make savings. Intergenerational fairness presents an opportunity to give every taxpayer, old or young, a fairer deal at every stage of their lives. If the covid crisis has taught us one thing, it’s that in a desperate time like this, we need to start to live within our means. We owe it to the taxpayers of tomorrow.