The baby boomer generation, known for their Tory voting tendencies, is facing some difficult decisions in the coming year. Concerned about the threat to their accumulated wealth from various economic shocks, they have two choices. They can either support the government’s return to austerity or consider sharing their fortunate gains from the property market and private occupational pensions, which primarily benefit older generations.
With the upcoming general election in 2024, Conservative ministers believe that their core constituency, individuals over 60, would prefer to see the state continue withdrawing from the public sphere. This approach, initiated in 2010 by George Osborne and David Cameron, aims to restrict tax increases and preserve the wealth of older generations.
A recent reversal on public sector pay exemplified this point. While there was relief when the teachers’ strike was called off after a 6.5% deal was proposed, there is concern over the prime minister’s announcement that the money would be recouped from Whitehall’s day-to-day spending. Originally, pay awards worth 3.5% were allocated in the budget, forcing as-yet-unnamed departments to make cuts or find efficiencies worth between £3bn and £5bn. The doctors’ unions have also refused to agree to a deal, which may result in even larger cuts to government spending when their pay is eventually settled.
There is speculation that savings will be made by redirecting investments, such as a £600m deal aimed at improving the flow of hospital patients into care homes, to finance the pay deal. This short-sighted policy not only hampers the ability of patients to leave hospitals but also undermines the expressed need to fortify the entire healthcare system against future pandemics.
To control spending, ministers are also relieved to see underspending in other areas. Michael Gove has recently returned £1.9bn of unutilized funds, including allocations for new affordable housing and building safety improvements. While these are capital budgets, all savings are welcomed.
Unfortunately, the government’s cost-cutting measures extend to other areas as well. For example, new children’s homes are predominantly built in economically cheaper regions in the north of England, often far from children’s parents and grandparents. This laissez-faire approach will likely result in future governments having to spend additional funds to solve these problems.
These frugal actions are influenced by aging voters who want the government to protect the range of subsidies and tax breaks they currently enjoy. They also desire cuts to taxes that disproportionately affect them, such as inheritance tax. It is due to this attitude that implementing climate change policies has proven to be challenging unless wind farms are built far offshore.
Under Boris Johnson, there was a mini-boom that increased departmental budgets to £573bn this year, a £160bn rise from 2019. However, double-digit price increases in the past year have undermined this progress. The Office for Budget Responsibility predicts that without tax increases, the current debt-to-national-income ratio of 100% will skyrocket to over 300% and possibly reach a worst-case scenario of 435% by the mid-2070s.
Frans Timmermans, the EU’s “green deal” chief, has warned that Europe as a whole is facing a similar situation and that efforts to maintain the status quo through lobbying are detrimental. He argues that we are investing in a worse future for our children and grandchildren, putting them in harm’s way.
Given the limited capacity for additional borrowing, it is imperative for Tory baby boomers to reassess their stance. They must be willing to share their property and pension gains for the greater good.
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