A grown-up conversation

Tax the baby boomers, cut their benefits, or cut something else

by Paul Johnson / January 25, 2012 / Leave a comment

Published in February 2012 issue of Prospect Magazine

Good times—but now the party’s over as the health and pension costs of an ageing population put increasing pressure on spending

In response to Britain’s biggest peacetime deficit, the government is embarking on an unprecedented set of spending cuts. But we should not see these cuts as either the beginning, or the end, of dramatic change in the public sector. Not the beginning because the shape of public spending has changed dramatically in the past 30 years—and there are some elements of these plans that look like a continuation of that longer run trend. And not the end, because an ageing population is going to put ever increasing pressure on spending (see Nick Carn’s piece in our investment report).

Significant decisions have already been taken to get us out of the hole we are in. But if we are to face the coming decades with sustainable policies and a robust budget we need to start a debate about how we will deal with the challenges that await us. There are rational decisions that we can make about the role of the state and the appropriate structure of the tax system which will help us through coming decades. But we can also create huge costs by cutting the wrong spending, relying on the private sector for the wrong things and increasing the wrong taxes.

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Comments

Sam99
February 15, 2012 at 18:41
There are many solecisms in this sloppy article. Perhaps the largest is the (conservatively) £100 Bn a year the 1% (let alone the 2, 3 and 4%s) have stolen from the economy in the last 30 years. I suspect The Pinch was written as a blind to disguise this larceny. More prosaically the triple lock (itself a dead letter for the foreseeable future) now uses CPI not RPI as Johnson alleges. And Paul Johnson seems to have little idea of how little in 30 years pensioners will have to live on, with CPI nibbling inexorably away at state, public service and half of private sector pensions,. They are much more likely to be a huge welfare problem for government rather than a tax source.
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Lupulco
November 26, 2012 at 12:14
Interesting article, but what about the baby boomers who never went to Uni, have not drawn any unemployment. Have just quietly got on with life, paid their taxes/Nat Ins, paid into Company/Private Pensions. Got thru the eras of Hi Inflation 20%+ paid % rates of 14% on Mortgages. Weathered the booms and bust of the economy over the past 40 years, paid for Schooling, University tuition fees of the privileged few?? and the Pensioners of their generation. Two questions, 1] What happened to our State Pension Contributions and 2] if MLR went back to its norm [RPI + 2%] this would help solve the annuity problem. I could go on, but there seems no point in it, as the MSM is trying to blame the boomers for the fault of our Political Masters of all Parties. I suppose you could cut the State Pension by, say 25%, but at the same time cut the pay, pensions etc of the Politicians and Civil Service by the same amount [ in % terms, not money]
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orthopaedic medical negligence expert
October 12, 2013 at 00:55
Wow! This blog looks exactly like my old one! It's on a totally different topic but it has pretty much the same layout and design. Great choice of colors!
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Paul Johnson is Director of the Institute for Fiscal Studies