The Spending Review: Intergenerationally unfair and unfairly targeted
On October 20th, the government is to set out its agenda for the Spending Review by outlining where it intends to make £83bn of cuts. In the run up to this, many details of the proposed cuts have been leaked to the media.
Last week, we learned that the higher education cuts were likely to amount to almost two-fifths of the total budget and almost four fifths of the higher education teaching budget. Over the weekend, there were reports that the defence budget would remain relatively unscathed due to the lobbying of the Secretary of State for Defence against cuts to his budget, while further cuts could be expected to the child benefit bill. Benefit cheats are also in the Chancellor’s firing line, although this latter focus is expected to make little difference to offsetting the total deficit.
With Wednesday fast approaching, a new report by the International Longevity Centre (ILC-UK) finds evidence that the cuts are publicly perceived as being unfair, particularly among those beginning their working lives, as well as those entering retirement.
Around two-thirds of those aged 16-24 years and over 65 thought that the impact of the cuts would unfairly affect their generation while less than half of those in the middle of their working lives (44-54 years) did so. Those beginning their working lives were also much more likely to favour an agenda of job creation over debt reduction compared to older groups.
Many of the leaks regarding the proposed cuts appear to corroborate the ILC-UK finding that the youngest and oldest will be disproportionately affected. Younger adults will be entering the labour market at a time of likely unprecedented job losses, having possibly completed their education in what may be one of the most expensive public education systems in the world. Young adulthood represents a critical stage in the life course being traditionally associated with transitions to independence, family formation, and beginning to save for old age through pension contributions. The long-term impact of the cuts may see these transitions put on hold.
On the other side of the age spectrum plans for some pension reforms have already been announced this year, although the Spending Review may bring changes to the payment of Winter Fuel payments system, among other cuts. With close to 1.75 million pensioner households being classed as being in ‘fuel poverty’, any cuts to Winter Fuel Payments may plunge even more pensioner households into the red. The ILC-UK report showed over a third of pensioner households would be forced to make savings to heating costs in the event of a reduction in their own household budget. Should this happen, it would quickly have a detrimental effect on the health of the nation’s older people, and actually increase (financial) pressure on the healthcare system.
However, in terms of the targets of cuts, there is mixed evidence from ILC-UK both in support and opposition of the Government’s focus. Transport, Out of Work Benefits and Defence were all popular areas among the public for savings to be made while education, policing, health and pensions were all areas the public wanted to see protected. So while last week’s leaks on defence and education may rile public opinion, any proposed savings to out of work benefits budgets may be more popular. However, opinion may change once the full impact of the expected redundancies comes to fruition; public opinion is likely to be volatile on this issue and this is a risk the Government appears willing to take.