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The Actuary The magazine of the Institute & Faculty of Actuaries

New social contract proposed to improve intergenerational fairness

A new generational contract is required to tackle the biggest challenges facing the UK, with sweeping reforms needed to the housing market and how the NHS is funded.

New social contract between generations ©iStock
New social contract between generations ©iStock

That is according to a report from the Resolution Foundation, which warns that the public is increasingly questioning whether young people are offered the same prospects of previous generations.

It reveals that the disposable incomes of 30-year-olds today are no higher than they were for people from the previous generation when they were that age, despite the economy growing 14% in the last 15 years.

The research also shows that healthcare is now the most pressing area of worry for British adults, with the report suggesting a £2.3bn NHS levy to help fund the system.

In addition, it proposes halving stamp-duty for first-time buyers, while offering a capital gains tax cut for those selling properties to people trying to get on the housing ladder.

“Many people no longer believe that Britain is delivering on its obligations to young and old – but Britain can rise to this challenge,” Resolution Foundation executive chair, David Willetts, said.

“From an NHS levy to put healthcare on a firmer financial footing, to building more homes, our report shows how a new contract between generations can build a better and more unified Britain.”

The report outlines 35 recommendations to improve intergenerational fairness, arguing that social care should be funded by a new progressive property tax replacing council tax.

It suggests applying National Insurance Contributions to pensioners’ earnings, rather than raising contributions for working age people, to help fund the £2.3bn NHS levy.

It also proposes a ‘Citizen’s Inheritance’ payment of £10,000 for all 25-year-olds, which would provide up to half of a deposit for a typical property outside London, or funds for a new business.

“Today’s young workers shoulder huge risks – they’re bearing the brunt of the rise in insecure work, and many have little prospect of a decent home or pension,” TUC general secretary, Frances O’Grady, said.

“To fix these problems we need an economy that works for all people – millennials and baby boomers alike. That means building more houses and giving everyone a decent retirement.”

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