15 Mar 2011

Counting the cost of ‘baby boom’ Britain

Assessing the debt the baby boomers’ generation (born 1945 – 1965) is leaving behind has become a minor cottage industry. Today a mighty economist of no small public interest waded in.

Martin Weale sits on the Monetary Policy Committee of the Bank of England making him one of the most influential people in the country. He’s been labelled a bit of a hawk (eyeing early interest rate rises a little more keenly than some of his fellow MPC members).  Read his paper published by the economic research centre he used to run, NIESR, and you might understand why.

The burden of providing for the Baby Boomers in old age falls on a smaller, poorer generation and, to boot, a generation that inherits massive debts. Professor Weale estimates (look away now if you are squeamish) that the inter-generational debt being passed on is £7.8 trillion.

Put that another way (a much better way, the economists argue), Professor Weale thinks that even assuming that George Osborne’s deficit reduction plan happens on schedule, you STILL have to cut the equivalent of 6-6.5% of GDP in spending or raise it in taxes… something approaching the scale of the consolidation all over again.

What does all this mean? It means belt-tightening carries on when 2015 passes. At nothing like the pace of the post banking crisis consolidations (Osborne’s or Darling’s) but through state spending reductons (health is the one some economists eye most closely), higher taxes, working longer and longer into old age or some gruesome cocktail of the lot. We have a piece on tonight at 7pm.

Me? I’m amongst the last of the baby boomers – born 1965 (March the 15th – not that you asked).

Other reading:
Public Sector pension shake-up
How fair is public sector pension reform

Tweets by @garygibbonblog

13 reader comments

  1. G says:

    Why does Channel 4 News go along with this prevailing notion that ordinary peoples’ pensions and decent working-conditions – of this generation or of previous generations – have necessitated ‘austerities’ when in truth the main cause is rapidly increasing inequality?

    You are supporting a ruthless corporate rationalisation of society. There are more than enough resources for everyone to live comfortably but they’re squandered by the super-wealthy on luxury, wars and other futile projects. Just try to argue against this and see how far you get; at least test it out. Then find yourself pragmatically rationalising that there is ‘no other option’ and see that you are living in a moral void.

    Like other news outlets you make scandalised noises about cuts but you concede the basic argument and shirk your duty to investigate and inform.

  2. Kim says:

    I am disgusted at the reports of the problems of paying pensions etc for ‘baby boomers’. Work it out for yourself – lots more people were born ergo lots more people were later in work paying tax and national insurance so there should be no problem. The cause is that over the years, too many governments have put their sticky hands in the pot and are now depriving me and other pensioners of money we have contributed for so many years.
    Lets see all MP’s trying to survive on just the state pension for a month in a house with no central heating etc. – they couldn’t do it.

  3. Margaret Phelan says:

    I am disgusted by the report just put out by channel four about the ”baby boomers” who have put a strain on the countries benefits. Firstly, lets get the record straight.. my husband and I have worked every day of our lives from the moment we left school; and are still working aged 66. We have saved hard all our lives, but it has not been enough to keep up with inflation because we havn’t had the luxury of being payed millions in bonuses. We have paid all our dues, and if at the end of our lives we need a few years support, I do not feel that is a lot to ask. It is we who have paid for four generations of idle work shy benefit scroungers, but I don’t see anyone making a song and dance about how much they have cost for the past 40 years. Get this sorted out before you try turning the public against us. You should be ashamed of yourself….

  4. Alison Barber says:

    Regarding the cost of baby-boomers I don’t disupte the sentiment of the message but why report it in such an antagonistic way ? It may be tempting to set one generation off against another to be deliberately controversial in order to gain interest but I believe it could be irresponsible in the long term. We should join together to resolve the issue. Has anyone thought of how GB can make money again instead of just spending it ?

  5. keith witts says:

    I cast my mind back to a film starring Charlton Heston, Soylent Green, i believe was the title, where the old and the sick were commited to a reprocessing plant. It doesn’t help when you get the reporter saying WE are going to have to pay for the Baby boomers, the WE is always used, and so very dicriminating.

  6. Larry the Lamb says:

    I couldnt believe my ears when I heard the Channel Four newscaster refer to the British baby boomers as selfish. The whole story stank of Europe in the 1930’s. The boomers selfishly enjoyed a fantastic lifestyle during rationing after the war, living in homes that had ice on the inside of the windows while contracting asbestosis and other life-reducing illnesses in factories across the land. All this just so later generations would have to fork out to support their selfish lifestyle.

    It was deeply offensive, but hey, lets blame the people that were born and bred here 65 years ago and (probably) paid taxes all their working lives!

  7. Western Independent says:

    Many Happy Returns, Gary. Perhaps you would have been able to take the day off, but for Japan. As it was, I didn’t think this report was one of your best. Two points: as the NIESR press release points out, their analysis doesn’t allow for any of the reforms proposed by Lord Hutton last week. (Nor, from what I can tell, to the change from RPI to CPI as the basis for increasing pensions.) Also, the expenditure and revenue graph on the NIESR computer screen was out to 2110-ish (equivalent to predicting from 1910 to now), so quite a lot may have happened by then! Or even by 2058 (1910 to 1958, wow), when the lines flatten off.
    Don’t expect to retire at 66 though. Still D Dimbleby is 73 and chairing Question Time (Is that where JS is going? It’s time the punters were told!)

  8. Saltaire Sam says:

    First, I declare an interest. Born 1945.

    Excuse us for being born but I would point out that from the age of 19 until the age of 65, I paid National Insurance. Note the name: Insurance.

    We were told that was insurance to cover the cost of our health and pensions.

    It was politicians who decided that it would all go into the general tax pot and be used for whatever they fancied – nuclear weapons, MPs moat clearing, helicopters to ferry royal family members to see their girl friends.

    I offer two plans to start redressing the balance (and there are certainly many more):

    1 Cancel trident.

    2 Increase the tax on people earning more than £250,000 a year – they can afford it.

    Just thought of a third (you see, it’s quite easy once you start)

    3 Stop people like Philip Green, who makes his money in the UK, avoiding paying tax here.

    But knowing the compassionate tories, their option will probably be that with the privatisation of the NHS, anyone over 65 will be offered the choice – pay for your care or accept a dignified state euthanasia.

  9. a.anon says:

    Why doesnt the government look into making voluntary euthenasia legal. That would save the state some money.

  10. Vanessa says:

    I thought this report completely ridiculous, what do you want us to do, all take a cyanide pill at 70? We can’t help being baby boomers, the only way we can help is by dying.

    If we have awful governments that have useless policies and no economic sense of course it will all go pear shaped. But I would think quite a few of us boomers have sufficient funds to live AND leave something for our children and grandchildren, nobody mentioned the wealth we’ll leave when we die.

    There is another population boom that will hit over the next 40 years that you never speak of. The 5 million poverty stricken immigrants that have moved here with nothing over the last 10 years, they will not contribute fully to the coffers, and so will be another group, called “immigrant boomers” that haven’t even paid in enough to pay for their pensions and health care, presumably their many children born here will support them?! At least the baby boomers worked all their lives in “booming Britain” and paid all their taxes.

  11. Ray Turner says:

    Lets not forget that the Baby Boomers have paid Income Tax and a small fortune in National Insurance….

    The problem is that National Insurance isn’t ring-fenced and the income to the Exchequer has been used on all sorts of things, including the ill-advised if not illegal wars in Iraq and Afghanistan…

    So its successive Governments fault, not the Baby Boomers. We’ve being playing things by the book, following the rules and (in my case at least) trying to plan ahead and not be any more of a burden than is absolutely unavoidable..!

    But planning ahead isn’t easy these days, whilst the Government keeps changing the rules and moving the goalposts…!

  12. Andrew Doig says:

    Gary Gibbons has sensationalised his report to stoke prejudice against a whole generation of people. Baby boomers, he says “soaked up state benefits and goods” and are “saddling the next generation with £8bn of debt”. A more rational analysis simply tells you that a boom in birth rate after the war will soon result in higher health, pension and social care costs as those people enter old age and live longer than expected. Hardly something to blame people for!
    All the people I know who were born after the war, far from “soaking up state benefits and goods”, worked hard all their lives,contributing taxes and national insurance and nurturing a welfare state and civil society fit for the next generation. This is cheap journalism at its worst and unchallenged could have serious consequences for people relying on the next generation to care for them as they cared for their parents and grandparents before them.

  13. Tom Wright says:

    Rather than putting out material that makes the young resent the old, you should look for the real villains of the piece: those who presided over the widening gap between the rich and the poor, the collapse in the standard of pension provision between generations, the massive increase in housing costs – and indeed a general fall in the standard of living of all Britons.

    The blame does not lie with a single generation, and characterising it as such conceals the truth. In fact Gary, its shockingly poor, even sensationalist, journalism. For shame – you make growing old a crime.

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