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This Is The Age Of War Between The Generations

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Yesterday was my 58th birthday. If I were a Greek worker I could retire. Although pension payments in Greece normally start around 61, special provisions allow anyone to retire at 58 if they have been in employment for 35 years. That, as it happens, is how long I have been at work. My index-linked pensions from the Greek Government would be worth 75 to 90 per cent of the average salary in the country, guaranteed for the rest of my life by the State.

If you want to know why Greece is going bankrupt and why the euro seems to be on the verge of disintegration, look no farther. The best argument I have ever heard for a break-up of the euro was this observation in a German newspaper: “The Greeks go on to the streets to protest against an increase of the pension age from 61 to 63. Does this mean that Germans should extend the working age from 67 to 69, so Greeks can enjoy their retirement?”

This, however, is not another article about self-indulgent Greeks and self-righteous Germans. The battle over bailouts in Europe is only a sideshow compared with the great social conflict that lies ahead all over the world in the next 20 years. This will not be a struggle between nations or social classes, but between generations — and it is a conflict that, in Britain, begins in earnest this year. The end of the Second World War in May 1945 marked the start of the baby boom, which lasted until the mid-1960s. Now, 65 years later, the corresponding retirement revolution is about to shake up our society, economy and political institutions.

If the word “revolution” sounds like an overstatement, consider the most important issue in British politics today — and then let me draw your attention to the most important book about this issue, written, as it happens, by a senior minister in the new Government. The issue is, of course, the unsustainable size of the public deficit. The book is called The Pinch by David Willetts, the Tory Minister for Universities, and its subtitle conveys his main message with his characteristic clarity and directness: “How the baby-boomers took their children’s future and why they should give it back.”

Mr Willetts shows how the overwhelming size of the baby boom generation, in comparison with the generations just before and after, allowed people born in the two decades after VE-Day not only to dominate culture, fashion and morality, but also to accumulate wealth, monopolise employment and housing and reduce social mobility for the next generation.

But strangely, however, nobody — least of all an active politician like Mr Willetts — seems to make the connection between long-term intergenerational tensions and the present controversies over public spending and taxes.

Why, for example, are governments everywhere running out of money, not just in Britain and Greece, but also in America, Germany, Japan and France? Why are taxes relentlessly rising in all advanced capitalist countries? And why is public spending being cut on schools, universities, science, defence, culture, environment and transport, while spending on health and pensions continues to rise?

The populist answer to these questions is that we are all about to pay for the greed of the bankers. But this is not true. According to IMF calculations, the credit crunch, bank bailouts and recession only account for 14 per cent of the expected increase in Britain’s public debt burden. The remaining 86 per cent of the long-term fiscal pressure is caused by the growth of public spending on health, pensions and long-term care. The credit crunch and recession did not create the present pressures on public borrowing and spending. They merely brought forward an age-related fiscal crisis that would have become inevitable, as by 2020 the majority of the baby-boomers will be retired.

The rational solution to this fiscal crisis would be for governments to reduce their spending on pensions, health and longterm care. Yet these are precisely the “entitlements” protected and ring-fenced by politicians, not just in Britain but also in America and many European countries, even as other government programmes are ruthlessly cut.

The politics of the next decade will be dominated by a battle over public spending and taxes between the generations. Young people will realise that different categories of public spending are in direct conflict — if they want more spending on schools, universities and environmental improvements they must vote for cuts in health and pensions.

Kaletsky is usually hilarious but for once he appears to be talking a bit of sense. I suppose his usual service will be resumed next week.

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  • 429 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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