As millennials face mounting financial struggles, thinktank the Resolution Foundation turned heads by suggesting they should receive a one-off £10,000 Government payment – and their other nine suggestions are just as radical.
British thinktank Resolution Foundation made headlines this week for its recommendation that so-called “millennials” should receive £10,000 on their 25th birthday as part of a wider effort to bridge the generational gap.
The organisation made the suggestion in a report produced by an “intergenerational commission” it convened, featuring senior bosses from groups and institutions including the CBI, London School of Economics, Bank of England, Cambridge University and homelessness charity Shelter.
Entitled A new generational contract: the final report of the Intergenerational Commission, the results of the two-year study included recommendations that could ease the financial strain for millennials, an age group typically defined by those born between 1981 and the early 2000s.
With housing prices at an all-time high and wages remaining stagnant, the proposed cash injection is intended to serve as a boost to help the UK’s young people do things like get a foothold on the property ladder or pay for education.
They would then, in theory, become actively contributing members of the economy and be better placed to help the UK grow.
In introducing the report, intergenerational commission chairman Lord David Willetts says: “We can and should provide more security for young people, from the jobs they do to the homes they increasingly rent.
“And we can promote asset ownership for younger generations so that owning a home and access to a decent pension are realities not a distant prospect in 21st century Britain.”
But the Resolution Foundation doesn’t expect this to be achieved via the £10,000 cash bonus alone – it’s one of ten ideas aimed at stabilising the national economy.
Increasing public funding for social care
Social care spending gradually decreased prior to the 2008 financial crash and council funding was cut by a third during the last Parliament.
This has coincided with an ageing population, where people are living longer and need more help from the Government.
It was suggested that property taxation should be reworked to provide an extra £2bn, which would be used for social care in an effort to mitigate this.
The Resolution Foundation added that property-based-contributions should be increased and directed towards care costs, but with enforced limits so nobody pays more than 25% of their wealth towards their own care.
An “NHS levy”
With the NHS publicly struggling, the foundation recommends a £2.3bn levy on the earnings of those above state pension age for the health service to be paid via National Insurance, as well as limited National Insurance on the occupational pension income.
The thinktank argues that millennials should have access to the same quality of healthcare that the baby boomers – those born between 1940 and 1960 who would be paying the levy now – had when they were young adults.
It also recommends a blanket increase in funds for health services across the UK from “better-off” baby boomers most likely to need them.
Boosting employment security
Despite the employment rate for people aged between 16 and 64 reaching 75.4% this April – among the highest it’s ever been – wages are comparatively low. It was therefore suggested the UK should “update our labour market policy for today’s challenges”.
According to the foundation, the way to achieve this would be to boost employment security with the right to a regular contract for people doing regular hours on a zero-hours contract.
This, combined with extending statutory rights for the self-employed, enforcing a minimum notice period for shifts, and providing “Innovations to support collective bargaining among young workers” would provide millennials with a stronger foundation from which to take beneficial economic risks, it was argued.
A better jobs deal for millennials
In an effort to help young people progress professionally and in turn provide businesses with a more skilled future workforce, the thinktank recommended £1bn be used to provide practical support and funding for young workers most affected by the financial crisis.
This “better jobs deal” would come in conjunction with a further £1.5bn to tackle persistent under-funding of technical education routes.
In order to fund both sums, the foundation suggested cancelling 1p of the upcoming corporation tax cut.
The UK’s current housing crisis has millennials struggling to afford to rent, let alone own, property.
The think tank acknowledged that no single solution would deal will the problem irrevocably but suggested that using interdeterminate tenancies as the sole form of private rental contract would help in the short term.
In addition to limiting rent inflation for three-year periods and introducing a new hosing tribunal to settle any disputes, it’s argued that the UK’s “poor record for security” with regards to housing would improve.
Progressive property tax
Building on this, the foundation recommended replacing council tax with a progressive property tax.
It would include surcharges on second and empty properties, halving stamp duty rates to encourage moving house, and a time-limited capital gains tax cut to incentivise owners of additional properties to sell to young first-time buyers.
It’s argued that this would rebalance demand so first-time property buyers could be in a better position compared to second or subsequent home buyers.
Piloting community land auctions
Looking to the long term future of the housing market, the thinktank argues the UK needs to “build more homes, year in, year out, in areas of strong housing demand while increasing the number of affordable homes, to reduce housing costs”.
To that end it suggested trialling community land auctions so local authorities could guarantee more land for house building.
To support this, it also recommended stronger compulsory purchase powers – the power to acquire rights over an estate in English land law – and a £1.7bn building precept to help local authorities raise funds for housing in their area.
Contracting for self-employed labour
Although recent pension reforms have reduced the decline in savings, which had been growing, the foundation argues that pensions of the very lowest earners and the self-employed are at risk.
To combat this, it recommended “requiring firms contracting self-employed labour to make active pension contributions, lowering the earnings above which employees are auto-enrolled, and providing greater incentives to save among low and middle earners by flattening rates of pension tax relief and exempting employee contributions from National Insurance”.
Collective defined contribution pensions
Lastly, the thinktank alluded to the need to “reduce the risks that individuals are being asked to bear around investment returns, longevity and inflation”, which it feels today’s baby boomers have been relatively safe from in retirement.
It recommended introducing a legislative framework for “collective defined contribution” pensions that do more to share investment risk, in addition to reworking pension freedoms to include the “default option of a guaranteed income product” – where, following an initial investment, an individual then receives an income for the remainder of their life, to be purchased at the age of 80.