Under the state pension triple lock, pensioner incomes have risen – but at the cost of shifting the economic burden onto younger workers. Turning the triple lock into a double lock is Andy Burnham’s plan to create savings to fund his new National Care Service. In doing so, however, he could have inadvertently created a new divide in Britain.
At present, publicly funded social care is restricted almost exclusively to people with the highest needs and fewest assets, leaving an estimated 3.5 million people in England without adequate support when they become ill or infirm in older age.
Burnham’s new social care service, as he has explicitly spelled out, is intended to protect “people’s homes and their savings”. But who really benefits from that? What about the people who don’t own homes, who have no assets they can sell and never will?
Under the PM’s plans, lower-income workers will be contributing through their taxes to a care system which they would have likely been eligible for anyway. But they will now have to rely on a less generous state pension, too. Meanwhile, their wealthier counterparts will still have their private pensions and property wealth behind them, because they won’t be forced to sell their homes to pay for care.
There is a risk that protecting the assets of wealthier people could further entrench inequality in years to come, particularly as millennials – a generation increasingly divided into those whose parents own property and those who do not – get older.
So far, most of the outcry about Burnham’s decision to scrap the triple lock has focused on what it means for older people. But given that the changes won’t come into force until 2030 and will mostly affect people who are not yet retired, this misses the point. The risk for Burnham is that he could appear to be protecting wealthier people’s homes by making care free at the point of use, without helping those who are less well off.
Younger workers – in their thirties, forties and fifties right now – will lose out on a more generous state pension when they retire, even if they are gaining a new National Care Service. There are nearly half a million households in England with people over the age of 65 who currently rent their home from a private landlord. While this is roughly 6 per cent of all older households, the private rental segment for this age group has grown by 24 per cent over five years and is predicted to rise further.
A huge problem is coming, and it’s barely being discussed. Millennials, and possibly Gen Z, may yet become the most economically divided generations in post-war history. This is because the average person in their thirties or early forties now has no housing wealth. Yet, the richest people in their thirties are far wealthier than even the richest baby boomers were when they were the same age.
Remember, those without family wealth are now facing worse living standards than their parents: they are navigating higher house prices, rents, student loan repayments, childcare costs and, of course, that paltry economic growth we constantly hear about.
Some lucky people might inherit cash and family homes that are spared by the National Care Service. But Burnham will need to address the fact that under his changes, older renters are more likely to find themselves living in poverty, and paying rent that could rise faster than their state pension.
The number of UK households aged 55 to 64 which are privately renting has risen by 82 per cent since 2008. According to analysis done by Sky News, these households face paying £461,460 more on average than an outright homeowner over the course of a 20-year retirement if they continue to rent from a private landlord.
There will come a time when older people living in private rentals need guaranteed stable rents. This week, we have learned that private rents have outstripped housing benefit yet again. Burnham is going to need to devise a plan to help older people who cannot afford to pay their landlord in years to come.
The UK’s wealth gap – the gulf between rich and poor – has grown by 50 per cent over the last eight years, according to the London School of Economics. By contrast, the average person in the top 10 per cent of households is now £280,000 wealthier than they were in the 2010s.
Pensioners are now less likely to be in poverty than children or working-age adults on average. But a rising number of retired renters in younger generations could very easily change that and bring back pensioner poverty in the future.
Inequality in Britain is increasingly defined by those who own assets and those who do not. In the not-so-distant future, we could be having a serious conversation about what sort of lock we have on housing benefit for pensioners.
Britain needed a National Care Service, but politicians can’t ignore what’s coming down the track next. Wealthy people are going to get wealthier, and less well-off people are going to find it harder to build wealth.