I promised David Willetts I would review his book “The Pinch” . The sub title tells the story – “How the baby boomers took their childrens future – and why they should give it back”.
My first reaction was that he is wrong. His case that the baby boomers have amassed so much wealth in houses and pensions that they have made life difficult for their children seemed to miss the obvious point that the baby boomer’s children will benefit from their parents wealth. David argues that baby boomers have pushed house prices beyond the reach of too many young people, but surprisingly few children inherit homes because the baby boomers go on to spend the value of their home on a good time or later on care in old age. Yet I meet children whose parents pay their home deposit, children who inherit their parents’ homes, and younger people who work in the businesses and care homes that the elderly are spending their money on. One way or another the wealth of the older generation has to find its way into the pockets of the younger generation. You cannot take your wealth with you on death. Parents often remain very generous to their children long into their childrens’ adulthood. If they spend it on themselves instead, those younger people in work get some of the benefit.
My second reaction is he is right in one very important respect. The baby boomer generation has been very selfish when it comes to public spending. It was on the watch of those quintessential baby boomers, Blair and Brown, that the UK public accounts were trashed comprehensively. The baby boomers in power wanted to spend, spend, spend. The bills they have left will fall more to their children to repay than to themselves. The baby boomers treated themselves to a great party in office, and have left the bills to the generations that follow on as Ministers and taxpayers. Under Blair /Brown we were all plunged into debt to the tune of £50,000 a head if you take into account the unfunded pensions, the PP/PFI and the bank liabilities ther state took on. The state debts the boomers incurred remain for others to settle. The private debts of the boomers die with them, usually covered by the assets they also leave.
The baby boomers were not as bad as David implies. They avoided the ruinous European wars which killed so many and did so much damage to British power and wealth in the twentieth century. The boomers did not send their children under compulsion to fight. The generation of leaders who took us into the Great War of 1914-18 have more to answer for than the baby boomers. The presence of US power on European soil cemented the good intentions of the new European continental democracies not to fight each other after 1945.
The baby boomers have presided over a huge surge in income and wealth creation through their enthusiaism for the consumer and digital revolutions. It is good news that on their watch poverty in the west has been redefined from not having enough food and clothing, to not owning a car and some of the consumer durables most now take for granted.
As a keen advocate of wider ownership I agree with David in disliking the way in the last decade progress to better funded pensions for all has been aborted by the tax and regulatory raids on the pension funds. I also agree that we need to make home buying easier for the up and coming. That requires a different approach to banks and credit, as has often been described on this blog.
David’s book is thought provoking and informative. It reminds us that government decisions are often about transfers of income and wealth between the generations, seeking to help the young and the old from the taxes of the middle aged. It is a good idea to look at the wider issue of transfers between the generations and see the willing transfers that occur as well as the compulsory ones. I recommend it to readers as a useful quarry of information about social change and the Generational tussles.