Pay millennials £10,000 and tax working pensioners to 'fix' inter-generational fairness, report suggests

The £10,000 would help young people when they need it most, the report said. Credit: PA

Everyone in the UK should be paid £10,000 when they turn 25, while working pensioners should pay national insurance contributions in a bid to help "fix" the "broken" generational divide between millennials and baby boomers, an influential think tank has recommended.

The "citizens inheritance" would be paid to young people at a time when they need it most, whether to buy a home, spend on education, set up a business, or invest in a pension.

The two-year study by the Resolution Foundation Intergenerational Commission also suggests that those over the state pension age who continue to work should also continue to pay national insurance to fund a £2.3 billion windfall for the NHS, with some national insurance payments also made on occupational pension incomes, the report said.

The study also suggested that straining social care services should also receive £2.3 billion funded through a property tax.

All of the commission's findings are designed to improve inter-generational fairness.

Currently people over the state pension age do not pay national insurance. Credit: PA
  • How would the money for the £10,000 citizens inheritance be raised?

The study also suggested that the money for the £10,000 citizens inheritance payment would be gathered by abolishing inheritance tax and replacing it with a lifetime limit for recipients of £125,000, with anything above that taxed at 20% up to £500,000 and 30% after that.

The commission estimated that despite lower rates, the move would raise an extra £5 billion initially by curbing avoidance.

  • What are the other recommendations from the report?

The report also suggested abolishing council tax, with a property tax introduced in its place that would include surcharges on second and empty homes but stamp duty would be halved to encourage people to move, under the report's plan.

The halving of stamp duty would be likely to help young people get onto the housing ladder, while surcharges on second homes would be more likely to hit older generations.

The report also recommends improving employment security, a £1 billion "better jobs deal" to help struggling young people get into work, and bolstered rights for renters.

Millennials are only half as likely to own their own home as baby boomers. Credit: PA
  • Are millennials worse off than previous generations?

The study found that many people in Britain do not believe that the young and old are being treated fairly.

It found millennials, people born between 1981 and 2000, are only half as likely to own their home by age 30 as baby boomers, born between 1946 and 1965, were.

Since they are less likely to own their home than previous generations, millennials are also more likely to rent, providing them with less security.

The report also found that young people spend around one quarter of their income on housing, while at the same age baby boomers spent just over 15% of their income on it, while the generation before spent just over five percent.

Aside from housing, the study found that millennials are between 20% and 25% less likely to be moving jobs voluntarily in their 20s - thereby missing out on associated pay rises.

  • Would older people be hit harder by the report's recommendations?

As people get older, they are more likely to use health and social care resources.

The UK's ageing population means that spending on health, care and social security is set to rise by £24 billion by 2030 and by £63 billion by 2040.

Currently those aged over the state pension age do not pay national insurance contributions, even if they are working.

If pensioners in work did pay national insurance, it could be used to provide extra funding for the NHS, something the older generations would be more likely to benefit from.

OIder people are more likely to require health and social care than younger generations. Credit: PA
  • Is it likely that the report would be implemented?

The study comes after reports that Health Secretary Jeremy Hunt is considering putting forward proposals echoing the recommendation that older workers pay national insurance.

However, ahead of the 2017 General Election the Conservatives scrapped proposals that anyone with more than £100,000 (including the value of their home) should pay for their own social care after it was attacked as a "dementia tax", and was likely to affect older voters - who are more inclined to vote Conservative - than younger ones.

In the 2017 Spring Budget, a proposed national insurance hike for self-employed people was scrapped after it was widely attacked.

Lord Willetts said the recommendations were 'not easy or comfortable'. Credit: PA
  • What has the response been?

Executive chairman of the commission, Lord Willetts, a Conservative former minister, admitted the recommendations in the report were "not easy or comfortable" but said many no longer believe Britain's young and old are being treated fairly.

He said: "Britain's contract between generations lies at the heart of society.

"As families we provide for our children and parents at different times.

"We expect the state to support these natural instincts - but too often it is tilted in the opposite direction.

"Many people no longer believe that Britain is delivering on its obligations to young and old. But our commission shows how Britain can rise to this challenge.

"From an NHS levy to put healthcare on a firmer financial footing, to building more homes and a Citizen's Inheritance to boost young people's career and housing aspirations, our report shows how a new contract between generations can build a better and more unified Britain."

Along with Lord Willetts, the commission was also chaired by TUC General Secretary Frances O'Grady, and Carolyn Fairbairn, CBI Director-General.

"The idea that each generation should have a better life than the previous one is central to the pursuit of economic growth," Ms Fairbairn said.

"The fact that it has broken down for young people should therefore concern us all.

"We need individuals, businesses and the state to pull together to address this challenge, and lift the living standards of young and future generations."

Ms O'Grady agreed, adding: "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 a decent pension.

"To fix these problems we need an economy that works for all people - millennials and baby boomers alike.

"That means building more houses, giving everyone a decent retirement, and crucially stronger unions and rights at work."

Baroness Altmann warned that the national insurance recommendations would be unpopular with voters. Credit: PA

The report was not welcomed by all, with a former Tory pensions minister warning that the national insurance recommendations would be as unpopular with voters as the abandoned election plans for a so-called dementia tax.

Baroness Altmann, Tory former pensions minister, warned that "only about one in 10 pensioners continues working past state pension age and are not all well-off.

"Many older workers keep working because they do not have good pensions and are trying to make ends meet.

"It is wrong to see them as an answer to the care funding shortfall.

"Why should they be targeted to pay for other people's care while non-working pensioners, many of whom have generous, often taxpayer-funded, pensions would pay nothing?

"I hope the Prime Minister will heed the lessons of the last election manifesto, which proved how politically toxic the issue of care funding can be.

"The aim should be to share the burden of care funding, not single out one group to find funding for everyone else."