Leading article: Hard times for the young

This newspaper is 20 years old, the same age as many of the young people who are going into the labour market at the most difficult time in those two decades. For these people, last week's political debate about the employment consequences of public spending cuts is no abstract game.

As we report today, graduates are feeling the squeeze. They recognise that the jobs market is competitive; that a 2:2 degree is not worth what it was; that they enter the jobs market carrying a debt burden of student loans not borne by previous cohorts; and that, despite the recession, house prices for many of them remain far out of reach.

There is no doubt that this generation of young people is unlucky when compared with their immediate predecessors. But it is important to be clear about precisely what is fair and unfair about their situation.

First, the size of the budget deficit bequeathed to the coalition by the Labour government represents a debt burden passed on from past taxpayers to future ones. Most of those taxpayers will be the same throughout the past eight years in which the debt was built up and – if we believe the Chancellor's projections in the Budget – over the next five years in which it will be repaid. But new taxpayers are getting a raw deal.

Secondly, the coalition's attempt to cut the deficit is going to make the state of the jobs market worse than it would otherwise have been. The Independent on Sunday remains convinced that cutting public spending too quickly and too deeply will mean that there are fewer jobs and therefore fewer taxpayers able to finance the debt over the medium term. But, while a tighter jobs market obviously means that there will be more graduates chasing fewer vacancies, the real pain will be felt at the lower-paid end of the market. The effect will be to force people to accept lower-paid or lower-status jobs than they would otherwise have hoped for, meaning that more employers will be choosier about hiring graduates with 2:2s, but that people with no qualifications will find it hardest of all to obtain work.

In this context, it becomes ever harder for politicians to argue that a degree confers a benefit for which the graduate should help to pay. No wonder that most of the candidates for the Labour leadership have distanced themselves from the tuition fees for which their government was so recently responsible. Yet it remains true that a degree is an asset and it would be unfair to ask taxpayers as a whole, most of whom do not have degrees, to pay more.

The other source of concern – the housing market – is more complex. It is undoubtedly a source of intergenerational inequity, although it is more important as a source of straightforward inequality. Roughly the same quantity of housing is available in this country now as two decades ago. In fact, there are more houses now, although immigration also means that there are more people looking for somewhere to live.

What has continued to happen, however, is that property is seen as a one-way bet on prices, so that existing property owners have become richer and richer. This is divisive, in that more property is bought up by buy-to-renters and that young people have become more dependent on financial help from their (propertied) parents to make their first purchases. So most young people can find somewhere to live, but they have to rent for longer and they are more dependent on parents for help. Those young people whose parents are not property-rich are finding it harder than the equivalent young people 20 years ago to buy a place of their own.

The solution to this long-developing problem is not obvious either, although the increase in capital gains tax on second homes in the Budget was a step in the right direction. It may be that a form of mansion tax, such as increasing council tax on higher-priced properties, would be a further such step.

So it is as well to be clear about the different effects of the three debts that make today's "lost generation" feel burdened: government debt, student debt and housing debt. But the most important problem facing young people today is the state of the jobs market. On this, graduates should not feel too sorry for themselves, as the brunt will be borne by their academically less well qualified contemporaries. And the most opprobrium should be reserved for the Conservatives and their Liberal Democrat allies, whose fiscal policies will make unemployment higher than it otherwise would have been.