Make way, old people, for Starmer’s quiet revolution

Starmer and Reeves admit they will raise taxes in her October Budget but insist it won’t hit ‘working people’ – which can be translated as ‘younger people,’ writes Andrew Grice. But playing the generation game is not without risk...

‘Warning: when young people lose confidence in the system, they don’t bother to vote – turnout again rose in line with age last month – but they can be lured back by far-right populists’ (PA)

During their 14 years in power, the Conservatives prioritised older people over younger adults to appeal to their core vote. The average pensioner household is now better off after housing costs than the average working one across most income levels.

Tax and benefit changes since 2010 left non-pensioners more than £2,200 a year worse off on average, while pensioners are less than £200 a year worse off. Last year, Keir Starmer promised to conserve what he called “the careful bond between this generation and the next”.

Ministers are not shouting their rebalancing act from the rooftops – they don’t want to alienate the oldies – but their priorities in their first four weeks in office reveal their generation game.

The huge housebuilding programme and legislation in the King’s Speech to protect renters are long overdue. A key, though unstated, goal is to boost pay. “Driving up wages will be good for the economy,” one Starmer adviser told me.

This partly explains Rachel Reeves’s decision to approve above-inflation pay awards for public sector workers. On social care, the priority is raising the pay of care workers rather than protecting baby boomers’ assets. Another priority is Labour’s package of workplace rights, though again ministers haven’t trumpeted it yet.

The new approach is not without risk. Reeves’s decision to end winter fuel allowances for all but the poorest pensioners will be very controversial when the cold weather comes.

Although the public supports the move by 47 per cent to 38 per cent, 49 per cent of over-65s strongly oppose it, so Labour has already made enemies. There is more bad news on the way for the older generation.

The chancellor admits she will raise taxes in her October Budget but insists she won’t hit “working people” – which can be translated as “younger people”.

Labour has ruled out increasing corporation tax, so that leaves the oldies – and Reeves might raise taxes on assets through higher capital gains tax and inheritance tax.

Such a move would be welcomed by the Intergenerational Federation, which points out: “The current UK tax regime strongly favours unearned income over earned income… In practice, because most private assets in the UK are held by older generations (mostly housing and pension wealth), the current tax system is intergenerationally out of step and represents an intergenerational injustice.”

Labour won’t unpick the triple lock under which the state pension rises by inflation, wages or 2.5 per cent, whichever is higher, even though it costs an estimated £11bn a year.

The Labour manifesto promised to keep it. “We had an election to win,” one insider explained. But Labour will not prevent the state pension dragging people into the income-tax net, as the Tories pledged. (It’s a bit rich of them to attack Labour as this will happen because of Rishi Sunak’s freeze on allowances and thresholds.) Age, rather than class, is now the biggest divide in UK politics.

Although the Tories did better than Labour among the over-60s at last month’s election, Labour was ahead in every other age group and Nigel Farage’s Reform UK edged ahead of the Tories among under-30s.

Warning: when young people lose confidence in the system, they don’t bother to vote – turnout again rose in line with age last month – but they can be lured back by far-right populists. Remarkably, the age at which people become more likely to vote Labour rather than Conservative rose from 39 at the 2019 election to 62, last month.

The Tories were punished for not having an attractive offer to younger voters. Their short-sighted core vote strategy was always going to come back to bite them at some point – and it finally happened.

The next Tory leader must ditch it: one in six Tory supporters is expected to die before the next election, by which Labour will introduce votes at 16. The new settlement planned by Labour is fairer. But both main parties should appeal across all age groups and should not encourage a war between the generations.

The public are more sensible about this than some politicians. Younger voters want the state to look after their elders, while oldies worry about their children and grandchildren being worse off than they were – millennials might become the first generation to experience this – and about their inability to get on the housing ladder.

Labour’s plan to build 1.5 million homes in five years, set out by Angela Rayner this week, is very ambitious and the government might well come up short. It is right to try and the stakes are high; a fairer settlement between the generations hinges on it.