Baby boomers must pay to fund the spiralling costs of health and social care or risk inflicting crippling tax hikes on their children and grandchildren, Lord Willetts will warn in a major speech on Monday.
“The time has come when we boomers are going to have to reach into our own pockets,” the Tory peer and chair of the Resolution Foundation will say.
“The alternative could be an extra 15p on the basic rate of tax, paid largely by our kids.”
“Is that kind of tax really the legacy we – a generation who own half the nation’s wealth – want to bequeath our children and grandchildren?”
“This is the moment when the chickens come home to roost for all of us, but the baby boomers in particular.”
He will declare that: ”The age of tax cuts is over.”
In its place should come more taxes on property and inheritance.
Failure to make tough choices about how we care for an ageing population will inflict further damage on the already frayed social contract between old and young, Lord Willetts will argue.
Baby boomers – born between 1946 and 1966 – are sitting on record levels of wealth and are poised to receive a bumper 20 per cent more in support than they will have contributed in taxes over the course of their lives.
Meanwhile, young people are struggling to find affordable housing, are earning less than people of the same age did 15 years ago and now face sharply falling take-home pay in order to fund their parents’ care in retirement.
Welfare spending is set to soar by £20bn a year by 2030 and by £60bn by 2040, new analysis by the Resolution Foundation shows.
The obvious source to plug this funding gap is higher taxes on the £6 trillion of wealth accumulated by the generation now set to retire, Lord Willetts will argue.
He will say that baby boomers have used their outsized political clout to shape policies that have advantaged them at the expense of others. Politicians on both the left and right must now accept the need for change, Lord Willetts will argue.
“In recent decades our big generation has enjoyed the fruits of a demographic sweet-spot with lots of working-age contributors, and relatively few pensioners and children.
“But we are now at a tipping point. The baby boomers are moving into retirement and there are fewer younger working-age people coming up behind them.
“As we, at last, emerge from deficits the recession gave us in this decade, we need to look forward to the pressures an ageing population is set to give us in the next.”
Lord Willetts attracted widespread criticism, particularly among young people, for overseeing the trebling of tuition fees while he was universities minister in the Coalition government.
But he has since styled himself as a champion of younger generations in his role as chair of the Resolution Foundation, which is conducting research into fairness between age groups.
Monday’s speech will signal the direction that the Foundation’s Intergenerational Commission is heading in as it prepares to conclude its research in a few months’ time.
To tackle the problem, Lord Willetts will propose “long overdue” reform of council tax and inheritance tax, both of which are effectively levies on wealth.
A 1 per cent tax on property values over £100,000 would bring in £9bn and a lower rate of inheritance tax on a larger number of estates would be fairer for all, Lord Willetts will say.
That would begin to tap the £2.3 trillion transfer of largely unearned property wealth estimated to have been accrued by baby boomers during their lifetimes.
He will say: “For many years, higher wealth taxation has been off the political agenda.
“But unless we act, at some point we will face a choice between changing our approach to taxation, or cutting access to the NHS and letting social care get into an even deeper crisis. We can’t delay that debate any longer.”
He will say that arguing for greater capital taxation may not be popular, but it is a battle that can be won.
“My parents’ generation bequeathed the creation of the modern welfare state six decades ago,” he will say.
“The gift to my children’s generation – and those that follow – should be a fair funding settlement that all contribute to, for a modern welfare state that supports young, old and those in between over the next 60 years.”