Daniel Hannan, Director of the Institute of Economic Affairs, argues that the current economic landscape in the UK disadvantages young people and that proposed solutions like increasing taxes on older generations are misguided. Instead, Hannan proposes a blueprint focused on stimulating economic growth and reducing regulatory burdens to enable younger generations to thrive.
Hannan asserts that young people have faced significant challenges, including lockdowns during a critical life stage due to the COVID-19 pandemic, and are now burdened with national debt incurred during that period. He also points to a tightening labor market, with a decline in advertised graduate roles, as a further impediment to their prospects.
He criticizes proposals, such as those from the Institute for Public Policy Research (IPPR), to increase taxes on older individuals, particularly through a property tax based on home value. Hannan argues that current tax levels in Britain are already at their highest point since the post-World War II era. He contends that higher taxation, especially in peacetime, is an inappropriate response to borrowing crises and that the focus should instead be on reducing state spending.
"Redistributive taxation is doubly bad for productivity," Hannan writes. "If you must give half of what you earn to the taxman, you will work less hard. If a chunk of your money then comes to me in benefits, I will also work less hard." He believes that raising taxes slows economic growth, exacerbating problems in the medium term. He highlights that state spending has risen significantly as a proportion of economic output and that more is spent on benefits for working-age adults than is raised from income tax.
Instead of imposing higher taxes, Hannan advocates for removing obstacles that hinder young people's employment and encourage emigration. He suggests measures such as reversing increases in the employers' share of national insurance, freezing the minimum wage to encourage hiring, and pausing elements of the Employment Act that he believes make it risky for employers to hire new staff.
Further proposals include cutting regulations, particularly employment regulations, and freezing benefits to incentivize work. Hannan also touches on reforming the National Health Service model, re-evaluating the classification of self-diagnosed mental health conditions, maintaining the value of the pound, and reducing taxes on savings and investment.
He argues that directly supporting younger generations through tax cuts, increased housing construction, and deregulation would foster an environment where ambitious young people can work, build, and flourish. This approach, he posits, would lead to a falling deficit, a strengthening economy, and potentially avoid cuts to state pensions. Hannan concludes that taxing older people more will not benefit younger generations and invokes historical arguments against intrusive taxation to underscore his point. The author is the Director of the Institute of Economic Affairs.