Meet Nick. He is 30 years old, has a good job and lives in London. He keeps himself to himself. He isn’t political. At least he never used to be. And yet the struggle of Nick has become the struggle of our age. For Nick, the social contract has broken down.
Nick embodies a generation for whom achieving the same life quality as their parents is a distant dream
After he has paid his taxes, student loan and the rent for his Zone 4 shoebox, Nick’s take-home pay is meagre. He knows where his money goes: on the benefits, social housing and remittances of one Karim, 25, an aspiring grime artist; and on Simon and Linda, 70, a retired couple spending the fruits of their final-salary pensions and property portfolio on cruises. Nick doubts that he will ever own his own home or receive a state pension. His bills only seem to grow, but the Scuzz Nation outside his flat only gets shabbier. Head in hands, he despairs as his bike is stolen once again.
Nick is not a real person. He’s a popular internet meme. He embodies a generation crushed by the costs of mass immigration and an ageing population, for whom achieving the same quality of life as their parents seems an increasingly distant dream. It is through Nick’s eyes that we should view Labour and Reform UK’s recent welfare pronouncements.
With his austerity-phobic backbenchers spooked by the local elections, Keir Starmer wants to restore eligibility for the winter fuel allowance for most pensioners and remove the two-child benefit limit. On the hunt for disillusioned Labour voters, Nigel Farage has gone further, aiming to scrap the cap and restore the allowance in full, at an estimated annual cost of £5 billion. This on top of the £80 billion the Institute for Fiscal Studies suggests his plan to raise the threshold for paying income tax to £20,000 could require.
How will all this be paid for? Public debt is already at 96 per cent of GDP; the IMF has indicated that there is ‘limited space’ for Labour to meet these demands with further borrowing. Rachel Reeves has almost certainly already lost her fiscal headroom and is on course to break her pledges not to raise income tax, national insurance or corporation tax. Farage has suggested Reform can save up to £350 billion over five years from scrapping migrant hotels, quangos, net zero and diversity, equality and inclusion initiatives. Binning a few Whitehall Pride flags is unlikely, however, to plug the budget black hole his plans would create.
Farage has the luxury of being in opposition. Reeves, by contrast, is dancing on the edge of a volcano, courting the same market reaction which forced her to make extra cuts only two months ago. The imminent spending review will make for grim reading for any Labour MPs deluded by Starmer’s newfound generosity.
The two-child benefit cap has long been a fundamental issue for Labour’s left. Bending to pressure to remove it would suggest Starmer’s 170-seat majority is made of sand. Labour’s decision to base its Child Poverty Strategy upon this U-turn suggests the party will always prefer chucking money at a problem to addressing the deeper causes of persistent worklessness and family instability.
From a narrow electoral standpoint, Labour’s timidity in the face of pensioner disgruntlement makes sense. Britain is becoming a gerontocracy – a state governed by its old people. Nick pays the bills but Simon and Linda vote in ever-greater numbers. The last election was the first one in which, in most constituencies, the majority of people who voted were over 55.
Two years ago, the Centre for Policy Studies crunched the numbers. In 1909, when the state pension was introduced, over-65s accounted for 5 per cent of the population. By 2072, that figure will be 27 per cent. The cost of pensions, adult social care and NHS spending on the elderly will more than double to 21 per cent of GDP over the next 50 years. Yet the number of potential workers per pensioner will shrink – from 3.3 in 2022 to 1.9 by 2072. Unless economic growth averages 2.9 per cent over the next 50 years – well above the norm of the past two decades– higher spending with fewer contributors means ever higher taxes for Nick.
The usual solution touted for improving the dependency ratio is human quantitative easing – in other words, higher immigration. But keeping 3.5 workers per pensioner would require net migration at an average of 666,000 per annum for the next half-century. By the 2070s, more than a third of the population would be first-generation migrants. Evidence suggests that many migrants are not net contributors across their lifetimes; adding a population larger than Sheffield’s each year won’t lessen the housing crisis under which Nick labours.
Farage is right that we need a higher birth rate. But removing the child benefit cap will only add to our soaring welfare bill – predicted to hit £373 billion annually by the decade’s end. If the welfare state is to be rendered sustainable, a reckoning is required. If neither Reform nor Labour are willing to defend fiscal restraint, the space is open for a party that stands up for those footing the bill. For a Conservative party struggling to redefine itself, championing Nick would be a good place to start.
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