James Max - James Max is a broadcaster, columnist and business expert

The elephant in the room

We didn’t learn very much from George Osborne from his Autumn Budget Statement. We knew the news was going to be grim. And it was. Similarly we didn’t learn much from Ed Balls the Shadow Chancellor. We knew he was going to say that the current economic malaise was the chancellor’s fault. And he did.

For all the political arguments and squabbling the current economic problems are more about a transfer of wealth from the older generation to the younger one. Historically the debate has been about the transfer from rich to poor. There are still those who argue for that. It’s a rather tired old record that hasn’t stood the test of time.

Before we examine the real problem, it’s worth looking at the attitudes that will have to change. A vast majority of the population want services but don’t want to pay for them. It was quite telling that in a recent poll conducted for LBC Radio and The London Standard, that although those polled seem to be reasonably happy with the incumbent as Mayor, when it comes to the Tube they are clear. In answer to the question “I am prepared to pay higher Tube fairs to fund improvements and improve the service” 70%disagreed. 13% didn’t know and only17% agreed.

As a frequent user of the Tube I do marvel. It’s an incredible resource. I know people complain about it and yes, I am sure it could be better. When you look at the new stations coming on stream they are quite magnificent. Canary Wharf stands out as one of the finest pieces of modern infrastructure development but even more recent than that are the improvements at Kings Cross. A hellhole it certainly used to be is now; with the help of substantial private investment through the wider infrastructure changes in the area, beginning to blossom. And that’s the point. Everyone wants to see these kinds of investments but is loathed to pay for them.

When it comes to pay. Many will gripe at the tube drivers paid over £50,000 a year. And they will probably support the public sector strikes whilst at the same time complaining about the cost of their tube and train tickets.

Except those who are 60 plus who receive their Freedom Pass.

No one would vote for more tax. Unless it affects someone else. No one wants to be paying more for goods and services. Unless you can get a better deal yourself. No one likes to see something they have already taken away. Unless it is from others who you think are being unfairly subsidised.

And so the problem continues. We, as a society, want many things. Yet the vast majority of the population is not prepared to pay any more for them. That rather implies that we are going to have to cut waste rather than tax more. It also means that universal benefits will have to go. I have yet to understand why child benefit is given to everyone. Or indeed that people are rewarded financially for having more children when they cannot afford the upkeep without state hand-outs. Or why everyone over the age of 60 regardless of financial means receives free travel. I could go on.

As we face the prospect of a longer period of stagnant growth so an alternative is going to have to be found. The problem that has not been discussed is age. Yet it’s age that is the root cause of the imbalances in our society.

The population is living longer. As a result if you retire and are to receive benefits whether through the state or a private pension that pension product costs more. Indeed if you live longer you will require extra services to keep you well and in older age to care for you. The simple truth is that no provision has been made. Whether it’s people living in their homes longer with little provision of new housing for those who are entering the workforce to the provision of healthcare and pensions, nothing has been prepared. An aging population also causes difficulties in the workplace too. If people are living longer, are healthier longer and able to work longer so the updraft from new blood is more difficult to accommodate.

I am not seeking to blame the older generation. I am, however, suggesting that until we tackle the problems associated with a population that lives longer and tackle the structural issues associated with the changes in demography we will simply put off the issue for the next generation.

In essence the Chancellor delivered what he could. Which was not a lot. Because he cannot and won’t face the reality. The reality is that we have an ageing population and are going to have to pay for it. In some respects, almost by accident, that is happening. Older people generally have savings that are producing little if no interest. Whilst younger people rely on debt which is quite cheap at the moment (if you can get credit). However this isn’t enough. Younger people will have to take responsibility for their own costs a little more and older people are going to have to recognise that in addition to working longer they may have to put their hands in their pockets for their children and their grandchildren.

Indeed until we realise that the elephant in the room is the country’s demographic change and adapt our policies and tax structures accordingly, the younger generation will become increasingly disenfranchised. Yes, they have been let down by an educational system that often fails. But they have also been let down by successive governments who have eroded the requirements for people young and old to take responsibility for not only their actions but also to recognise the true cost of living.

The solutions will take a while to wash through. Those in their twenties, thirties and forties will have to put more into their pensions and expect to work longer. This age group will also have to accept that uniform benefits will have to go. Similarly the older generation will have to take more responsibility for their children and grandchildren for longer. It’s no longer acceptable if you are financially sound to expect those leaving school or university to become financially self-sufficient straight away. The reality is we are all, rich and poor going to have to make more provisions for our future and put our hands in our pockets to get out of this mess.

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