Boomer and bust

Think tank: Adam Smith Institute

Author(s): John MacDonald; James Sean Dickson; Dr Michael Turner

December 15, 2022

This report from UK think tank the Adam Smith Institute looks at realigning incentives to reduce intergenerational inequality.

The Adam Smith Institute’s latest paper, written by John Macdonald, James Sean Dickson and Dr. Michael Turner, proposes policies to address the causes of Britain’s growing intergenerational inequality. Intergenerational inequality is not just an issue of fairness between the young and the elderly. The ways in which it is expressed are a drag anchor on the productivity and economic growth that Britain desperately needs; Drastic reforms to planning, tax, welfare and education are needed to boost productivity, wages and prosperity, and lower taxes from a postwar high; In September 2021, research for the ASI showed that 38% of Britons supported building more homes in their local area, while 33% opposed it. Today, support is up 14pts to 52%, and opposition is down 8pts to 25%.

The paper recommends the following policies: See through Street Votes; Street Votes would allow local communities to set design rules to en-sure high quality and, if they choose, graceful densification. By giving residents a financial and amenity incentive to vote for densification, this will ensure building can be a win-win for residents, helping to ad-dress the housing supply shortage; Replace the triple lock on pensions with a smoothed earnings link; A smoothed earnings link would enable the state pension to be hiked to deal with significant inflation shocks, but minimises situations in which it will continue to substantially outstrip earnings, or where the Government has to temporarily suspend the lock; Unfreeze income tax thresholds. Our polling finds substantial support for indexing income tax thresholds via inflation. The Government should take the poorest workers out of tax altogether by pegging the Personal Allowance and National Insurance threshold to the National Minimum Wage rate, and begin pulling higher rates in line with inflation; Abolish Stamp Duty; Stamp Duty is an incredibly damaging tax. It disincentives people from making improvements and moving out of large properties when they might otherwise want to. It also destroys 75p of wealth per £1 raised; Offer personal development loans to school leavers; The student loan system should be reformed towards neutrality for school leavers, removing any bias towards the university system. This could be achieved by offering a £6,000 per annum income contingent loan over 3 years to all school leavers who do not attend university.