Baby boomers to get far more welfare support than Generation X and Millennials, warns report

Wealth taxes are the only way to avoid harsh future welfare cuts, study says - as the post-war generation prepares to drain the public finances

Retiring baby-boomers are poised to enjoy the rewards of the welfare state - while younger generations could miss out (Alamy)

New taxes on wealth are the only way to avoid harsh future welfare cuts for Millennials and other working-age people, a stark report has warned.

Baby boomers - born between 1946 and 1966 – are poised to receive a bumper 20 per cent or more in support than they will have contributed in taxes over the course of their lives, the study said.

But the prospects are far bleaker for younger cohorts, for those in Generation X – born from the mid-1960s to the early 1980s – and for Millennials, born later, according to the Resolution Foundation.

They are threatened by sharp pressures on welfare spending from the early 2020s, as the large generation of baby boomers reach retirement and start to draw more heavily on the welfare state.

Now the head of the Resolution Foundation has warned it will not be possible to raise the taxes required – an extra £160bn a year, by 2066 – from the normal sources of income and consumption.

“The answer is wealth, which has more than doubled compared to our national income since the 1980s while the tax take hasn’t shifted,” said Torsten Bell, the Foundation’s director.

“This is particularly relevant given that half of our wealth is owned by the cohort who are approaching retirement.

“Starting a debate about taxing wealth isn’t easy. But the alternatives are stripping back our welfare state or very large tax rises on working people. Neither of these are easy either, and nor are they desirable.”

The report, for the Foundation’s ongoing Intergenerational Commission, looked at what people put in and take out from the welfare state over their lifetime.

By examining past, present and projected taxes and education, health and social security receipts, it estimated the net contributions of different generations.

The evolving nature of the welfare state, tax revenue changes and changes in society mean the baby-boomers have benefited far more than other generations, it said.

The generation above, known as the silent generation, will do less well, but are still projected to receive about five per cent more than they will have paid in, according to the think-tank.

Mr Bell said there had been “very little engagement with this challenge”, with the Government focused, since 2010, on short-term deficit reduction instead.

“Office for Budget Responsibility projections show that maintaining present levels of state provision would mean spending as a share of GDP increasing by seven per cent by 2066,” he wrote, in an article for The Times.

“Without action, the debt would rise to 230 per cent of GDP. Meeting this cost would be equivalent to raising total tax revenues today by £160bn a year.”

Without wealth taxes, the result would be “reduced public support and major cuts to the welfare state which previous generations of social democrats have fought so hard for”, Mr Bell warned.