A £10,000 payment should be given to young people, and pensioners taxed more, a new report into inter-generational fairness in the UK suggests
A think tank is recommending collecting National Insurance payments from people over the state pension age who are still in work, in order to improve outcomes for people on low and modest incomes.
The Foundation suggests that this group should continue paying National Insurance – from which most are currently exempt – to help fund a one-off £10,000 payment to all 25-year-olds.
The Resolution Foundation proposes that funding should be limited to additional education and training, paying off tuition fees, putting down a deposit for a home, investing in a business or saving in a pension.
The report proposes that this money be raised by abolishing inheritance tax and replacing it with a lifetime limit for recipients of £125,000 before taxes kick in. This, the report says, will make life more fair for millennials (people born between 1981 and 2000), allowing them to pay for a deposit on a home, start a business or improve their education or skills. Millennials are half as likely as baby boomers (people born between 1946 and 1965) to own their own home by 30.
The report warned that the millennial generation are the first to see their earnings dip below the rates their parents earned at the same age, while also being unable to get a foot on the housing ladder.
We have to tackle substantial long-term problems – they will not fix themselves. We hope that as the important issues we identify are increasingly recognised, our proposals can be a useful guide to action
The Foundation’s chairman, Lord Willetts, the former universities minister under David Cameron, argued that young people were being locked out of the housing market. In the report, Willetts said: “The ideas we set out are not easy or comfortable. We are not expecting political parties to embrace them straightaway. Indeed, we look forward to lively debates in the months and years ahead. But we have to tackle substantial long-term problems – they will not fix themselves. We hope that as the important issues we identify are increasingly recognised, our proposals can be a useful guide to action.”
The report also suggests revisiting housing benefit rules to improve support for younger families on low-to-middle incomes, and replacing council tax with a progressive property tax – including a tax-free allowance and multiple tax bands – that is related to up-to-date values.
Potential first-time buyers must typically save for eight years to afford a deposit to buy a home. A typical 20% deposit in London is now more than £80,000, according to the Nationwide Building Society. Elsewhere in the UK, the average deposit could be closer to £20,000, the lender said. Lenders have been told by regulators to set stricter affordability requirements since the financial crisis, to avoid financial stress on the system and on individual borrowers.