Writing in today's Times, David Willetts says he believes that increasingly we are a society divided by age. In a nutshell, his argument is that "young people have to sacrifice a lot of their income today to afford the high house prices that boost the wealth of older people. But the older people are reluctant to borrow against this wealth so their living standards don’t rise either."
Changes in the housing market and resulting wealth transfers have thus weakened the legitimacy of the intergenerational contract in areas such as the NHS and state pension both of which are largely funded out of taxes from the working age population, while their services are drawn upon more significantly by people in retirement. As a result, the discussion paper accompanying the research referred to by Willetts, published yesterday by the International Longevity Centre, consequently poses some difficult questions:
Having seen such dramatic asset accumulation, can older cohorts expect to rely on the young to pay for them in retirement, and more generally, the costs of the UK’s ageing population? If not, how can the Government create greater awareness that older cohorts will have to use their housing wealth to fund retirement? How can the Government go about changing attitudes which are often entrenched against such an idea?Some of the ideas mooted in response have significant merit (for instance, the possibility of incentivising down-sizing among older people by waiving stamp-duty for those in retirement moving to smaller accommodation) and quite clearly Government will have to play a role in facilitating a solution to this issue. However, both the level at which these questions are pitched and the nature of the recommendations made in the paper indicate an over-reliance on looking to the State for economic answers.
Yet, this is more than simply an economic issue it is relational. By very nature of the intergenerational solidarity discussed in the report, the issue impacts every level of society not just the state, but individual families. As Government "seeks to forge a new societal settlement," including "the development of other sustainable long-term care funding models for younger cohorts" such as the combined loan and savings account discussed by Willetts in the Times, perhaps we need to remember that a sustainable community is a relational community.
Once again, this is not all about politicians in Westminster passing laws, it's about social responsibility ... it's about us as neighbours in a society playing our part as well.