Monday, 26 March 2012

The Granny Tax was a surprise that should be welcomed by young people

So far those who were ‘late to the party’ have been hit hard by the economic downturn; sharing the burden is the right thing to do.

One of the biggest surprises of George Osborne’s budget, and certainly one of the biggest political risks, was the decision to freeze tax allowances for pensioners. This was certainly a controversial move: the reaction of the right-wing press exemplifies the scorn Mr Osborne is facing from one of his core support groups, who also happen to be much more likely to vote.

The decision will mean that pensioners will lose money in real terms (the Evening Standard estimated the average London pensioner will be £83 shy annually), and in other parts of the country this could have a harder impact. But the measure has not proposed a cut to allowances, and with growth estimated for 2012-13 to be around 0.8%, a freeze was the right thing to do. The elderly already rightly receive other bonuses, such as free travel passes, and have arguably borne a relatively small burden from the recession.

The under-25s on the other hand, with slightly over a million unemployed and that first rung on the housing market still impossibly high, have been hit by hard times. With the next generation of graduates set to exit higher education with debts nudging £40,000 (including maintenance for a 3 year course), it seems to me that a freeze on a tax exemption seems like small change. This is especially so considering the main source of wealth for many older people: property. Particularly in the Southeast, property prices over the last 40 years have skyrocketed (the highest have been in Brighton, where prices have increased 40-fold), meaning that those in their prime during the boom times were able to ride the property bubble to relative affluence.

This is not without qualification; the elderly deserve to live in comfort and to enjoy what they have earned in retirement. Similarly it should go without saying that those dependent on the state should receive as much as can be afforded. However as one weekend commentator put it, being under-25 in the 2010’s is the equivalent to turning up to a party to find the house trashed and everyone being thrown out for being too drunk. The baby-boomers in particular, have had it far too good.

With the retirement age ever increasing and the debt-to-employment ratio horribly disproportional, it seems to me only fair that those who have already made their money should take a small hit in these times.