Chapter 10: Generation Gap

There has been much talk lately about the supposedly privileged position of our older people, who it is often said are mortgaging the lives and prospects of their juniors. Particular concern has been expressed about the series of high budget deficits and the consequent increase in national debt, all to be paid off by younger people after their seniors have left this plane. Troubled authorities decided that such a Gordian knot needed the attention of a modern Alexander the Great. It can hardly surprise anyone that they turned to that incomparable unknotter, Sir Bertram Utterside, former professor of social studies at one of our leading universities. He applied his usual intense concentration to the problem and reported as follows:

I was pleased to receive the buck in this matter, as I am tired of hearing ill-informed references to it. Let me start by saying that those now well into their seventies lived through a world war and its aftermath, enduring severe deprivations of many kinds, including rationing of food, clothing, fuel, etc. They also had to contend with frequent power cuts, water obtained from standpipes, and other miseries which need not be mentioned here. Notwithstanding all that, they toiled on, building up most of the wealth we all now enjoy. They had to adapt to a bewildering variety of social changes, not all for the better from their point of view. In millions of cases, they inherited little or nothing of material value from their forebears. I will not say any more about this.

With regard to budget deficits, I agree that we could have avoided them by living within our means. I also grasp that the shortfall between government spending and income is currently something like £150billion a year and that this adds to the national debt, thus placing a burden on future taxpayers. However, that is not the main point. What we have to consider is that those paying whatever is required to clear the overall debt, which I understand is about £900billion, include the older people who are still paying taxes. It is also noteworthy that most of the debt we have as a nation is owed to ourselves, because our institutions, among them pension funds, buy government securities on behalf of many of us.

Now to the postulation that younger people will have to pick up the total bill for our national profligacy. I have just indicated that they will not do so, as their seniors will pay some of it. As we are dealing with a gradual process and cannot establish a clear dividing line in terms of age, nobody can say who will pay what proportion. I have consulted a prominent actuary who is also distinguished in the field of financial analysis. He estimates that people now under fifty will probably pick up about two thirds of the current bill, meaning that they will fork out £600billion or so. Even if he is wrong and the whole burden falls upon the rising generations, what would their net position be after everything else is taken into account?

These younger people will inherit bank balances and other monies to a vastly greater extent than their older compatriots do or did. That is only a start. What about dwellings? Our housing stock is close to 70% owner-occupied, which means there are roughly 17million units in this category. Taking the average price as £150,000 or so, this sector currently has a value of £2.55trillion. Nearly all of this housing wealth will in due course be inherited by the now allegedly disadvantaged young people. In most cases, the properties will be wholly or largely free from mortgage debt and the recipients of this bounty will, generally speaking, have done little or nothing to earn it. They will therefore receive several times more than whatever they pay to help clear the national debt, and should think themselves fortunate in getting such a high return on so modest an investment.