For the first time in a century, today's middle-class children will be ‘worse off than their parents’

There is concern that a ‘perfect storm’ of graduate debt, lack of finance and job insecurity is brewing (Getty)

A grandmother in her 80s now has a higher average living standard than someone in their 20s who is working, due to high housing costs and poor wages, a government commission will warn this week.

In a report to ministers, the Social Mobility and Child Poverty Commission will say that today’s middle-class children are on track to become the first in more than a century to be materially less well off in adulthood than their parents.

It will call on ministers to extend government initiatives designed to reduce poverty in the poorest 10 per cent of people, to cover a wider range of targets.

The findings of the 250-page report, to be laid before Parliament on Thursday, will reignite the political debate over the so-called “squeezed middle” that have been particularly hard hit in the economic downturn.

The Commission is expected to recommend a range of Government policy measures to reduce income inequalities – not just among the poorest in society but also between young and old.

It will point to a gathering “perfect storm” of graduate debt, lack of finance to buy homes and job insecurity that threatens middle-class children as they emerge from full-time education.

Graduates will come out of university with up to £50,000 of debt while the proportion of 25 to 34-year-olds who own their own homes has fallen from 60 per cent to 40 per cent in the past decade.

The number of 18 to 24-year-olds unemployed for more than two years is at its highest since 1994.

The Commission, which was chaired by the former Labour Health Secretary Alan Milburn, is expected to praise some recent Government initiatives – including free schools as way of boosting economic achievement.

But it will warn too many are being set up in less-deprived areas and recommend that improving social mobility is included within their future remit.

A source close to the Commission said: “There are some really difficult problems which we have identified that will need to be addressed if we are not to store up very significant problems in the future.

“This will be controversial, but for the first time in over a century there is a real risk that the next generation of adults ends up worse off than today’s generation.”

Among its conclusions, the Commission is expected to say that those at particular risk are low-attaining children who are not poor enough to enjoy additional help from the system such as free school meals, but whose parents do not have the resources to help set them up in adult life.

Pupils on free school meals benefit from an additional spend of £14,300 to improve their chances in life through the pupil premium. Yet nearly two-thirds of those who fail to attain an A to C grade in English and maths are from backgrounds not considered to be deprived.

The Commission is also expected to warn that children in the south-east but outside London are being particularly disadvantaged.

Children in the capital on free school meals do 50 per cent better in their GCSEs than those in other regions. The Commission is expected to say this is because a greater proportion of high-quality heads and teachers live in disadvantaged areas in the capital than elsewhere, in part because of the so-called “London weighting” wage lift for those in the capital.

Some of the weakest schools, it is set to point out, are located in bastions of middle England, such as Peterborough, west Berkshire, Herefordshire and satellite areas around London.