In a new briefing note The Case for an Office for Inter-generational Responsibility, published by the Centre for Policy Studies on Thursday 18 June, leading analyst Michael Johnson responds to the OBR’s latest annual Fiscal Sustainability report, warning that UK debt is snowballing with frightening momentum – and it is the young who will be hit hardest.
The OBR’s FSR report confirms the findings of Johnson’s recent CPS report Who will Care for Generation Y?, in which the author revealed that the gap between the nation’s assets and liabilities grew by an unsustainable 51% in the five years to end-March 2014, to £1,852 billion. At 111% of GDP, this is equivalent to £70,000 per household – if the State Pension, the largest of all unfunded liabilities (roughly £4,000 billion) is included, the burden per household rises to £221,000.
To stop the debt snowball a simple intervention mechanism is required right at the heart of the legislative process. In this regard Johnson urges the Government to take action now by introducing an Office for Inter-generational Responsibility (OIR).
Michael Johnson explains:
“The UK’s debt mountain, combined with the risk of an anaemic long-term rate of economic growth, poses a serious threat to Generation Y’s future economic wellbeing. This, a generation already faced with unaffordable housing, college debts, fragmented careers, earnings stagnation, relatively thin occupational pension provision, and a rapidly retreating State Pension age.
An Office for Inter-generational Responsibility (OIR) should be established to co-ordinate the production of Inter-generational Impact Assessments and to scrutinise all tax reliefs and exemptions. It could reside alongside (or within) the OBR, and could fruitfully liaise with the (now expanding) Office of Tax Simplification.
An OIR should exude an ethos of fiduciary duty towards current and future taxpayers, and aspire to having a reputation for independence akin to that of the OBR. If it were to achieve this, it would help close what is currently a significant accountability gap between Parliament and the people (particularly future taxpayers). In addition, all tax reliefs and exemptions could be subject to a five year sunset clause, after which they would cease. Lobbyists would be required to present their cases directly to the proposed OIR, placing blue water between vested interest groups and ministers.”