Dr Neil Shastri-Hurst is a barrister, surgeon, and former British Army Officer.
The year 2020 was the very definition of an annus horribilis. It was a year that will be etched upon our memories for all the wrong reasons. A year most would hope to forget. As we emerge from 2020 and into the dawn of a new year, the end may not be quite in sight; there are unquestionably significant challenges that lie ahead. However, there is real hope that 2021 will be a better year.
Crises, by their very nature, create opportunities. Whilst most would prefer not to go through the crisis in the first place, ignoring such opportunities would be a mistake. Coronavirus has been the mother of all crises. A global pandemic that has presented unimagined challenges to world governments. From the economic impact to the imposition on civil liberties, governments have had to make unprecedented decisions in the face of a rapidly evolving scientific picture.
It is with this backdrop in mind that the need to reimagine the social contract that underpins our nation has become even more pressing.
The conceptual basis of the social contract is an important commitment to societal commonality. It rewards hard work. In return for paying your fair share through the taxation system, there is a tacit expectation that living standards will rise, there will be a pension pot upon retirement, and if all else fails the state will provide a sufficient safety net to support you.
Those are laudable aims. In pressing for the contract to be reimagined I do not seek to undermine those guiding principles. However, that contract was written in a different time. It was written when the number of taxpayers well outstripped the number of retirees. Times have changed. With increased life expectancy, retirement is considerably longer. Combined with inequalities in the share of wealth and public spending, the current social contract is being pushed to capacity.
In addition to the generation divide there is also a skills divide. With increasing automation of certain jobs, obtaining stable employment is, for some, a genuine battle.
It was the millennial generation that was disproportionately hit by the financial crisis that hit the world economy in 2008. It led to high levels of youth unemployment and job insecurity for those fortunate enough to be in work. Growth in wages was muted and did little to assist in paying off increasingly mounting student debts. With a market flooded with graduates, many were ending up in non-graduate roles. Prior to this year there were signs of improvement. The sensible fiscal policy of the Conservative led administrations from 2010 onwards had been rewarded with the signs of growth. There was cause for optimism for sunnier times. And then Coronavirus struck. And, once again it will be the millennials that bear the brunt.
Home ownership is a Conservative dream yet, back in 2018, the Resolution Foundation report found that millennials were 50 per cent less likely to own their own home by the age of 30 compared with the baby boomers born between 1946-1964. Faced with the economic constraints post-Covid that is only likely to get worse. Coupled with the fact that, as of 2017, average pensioner income outstrips those of working families, the threat to the social contract cannot be underestimated.
The welfare system, which operates in the UK, is on a “pay as you go” basis. Workers pay in now to fund benefits for the current crop of retirees, as that generation did for those before them. With individuals living for longer retirees will, inevitably, take out more than they have put in. That is not their fault; it is merely a by-product of improved life expectancy. What results however, is a scenario in which there is a redistribution of wealth towards those that live longest; statistically, this group is not only the longest living, but also the wealthiest in any event. This compounds the issue.
Of course, none of this is to say that there are not those of retired age who are struggling to make ends meet. Nor is it to suggest that the baby boomers have it all easy, enjoying a carefree retirement – far from it. With people living longer and millennials less able to strike out entirely independently, there is a generation above and below that needs their support. Rather than a carefree retirement it is often defined by being a carer to elderly parents and relatives and an alternative bank to their children.
It is with all of these competing factors in mind that we cannot put off revising the social contract any longer. That is not to say it will be easy. Older voters are more naturally Conservative voters; upsetting them goes against the natural instinct of politicians. Likewise manifesto promises have been made and should, in normal circumstances, be honoured. But we are no longer living in normal circumstances.
As we emerge from this crisis, we must use it as an opportunity to think differently on how the social contract works so that it works more fairly for all. The guiding principle must be that no generation should be in a worse position than those that go before them.
So what does this mean in reality?
Well, firstly a re-evaluation of retirement age beyond 65. With increasing life expectancy and improved health in later life, the artificial bar of retirement at 65 no longer makes sense. We must not see older people as less able to contribute; in fact, to the contrary, they have a wealth of experience to impart. Flowing from this is the inconsistency whereby those over the age of 65 are not expected to pay national insurance. There is no good reason for such an exemption and it should be closed off.
The second element for reform is the triple lock. Where once it was the right course of action, that cannot be said any longer. With sluggish wage growth, to maintain the 2.5 per cent provision is no longer defendable. Instead, it should be pegged to life expectancy.
And finally, we must look at social care provision. This is a mighty topic, a full analysis of which will need to wait for another day and another article. But as a starter we should be positively exploring an insurance funded care system. We should also take much closer heed of enhancing the role families play in the provision of care; and this means providing financial recompense to reflect the gratuitous nature of what would otherwise be picked up by the state.
As with everything in life, with time things evolve. The fundamental tenets of the social contract have withstood the test of time but the contract is now creaking under the strain. As the nation emerges, like a phoenix from the ashes of the Covid crisis, now is the time to reshapreshape it for future generations.
Dr Neil Shastri-Hurst is a barrister, surgeon, and former British Army Officer.
The year 2020 was the very definition of an annus horribilis. It was a year that will be etched upon our memories for all the wrong reasons. A year most would hope to forget. As we emerge from 2020 and into the dawn of a new year, the end may not be quite in sight; there are unquestionably significant challenges that lie ahead. However, there is real hope that 2021 will be a better year.
Crises, by their very nature, create opportunities. Whilst most would prefer not to go through the crisis in the first place, ignoring such opportunities would be a mistake. Coronavirus has been the mother of all crises. A global pandemic that has presented unimagined challenges to world governments. From the economic impact to the imposition on civil liberties, governments have had to make unprecedented decisions in the face of a rapidly evolving scientific picture.
It is with this backdrop in mind that the need to reimagine the social contract that underpins our nation has become even more pressing.
The conceptual basis of the social contract is an important commitment to societal commonality. It rewards hard work. In return for paying your fair share through the taxation system, there is a tacit expectation that living standards will rise, there will be a pension pot upon retirement, and if all else fails the state will provide a sufficient safety net to support you.
Those are laudable aims. In pressing for the contract to be reimagined I do not seek to undermine those guiding principles. However, that contract was written in a different time. It was written when the number of taxpayers well outstripped the number of retirees. Times have changed. With increased life expectancy, retirement is considerably longer. Combined with inequalities in the share of wealth and public spending, the current social contract is being pushed to capacity.
In addition to the generation divide there is also a skills divide. With increasing automation of certain jobs, obtaining stable employment is, for some, a genuine battle.
It was the millennial generation that was disproportionately hit by the financial crisis that hit the world economy in 2008. It led to high levels of youth unemployment and job insecurity for those fortunate enough to be in work. Growth in wages was muted and did little to assist in paying off increasingly mounting student debts. With a market flooded with graduates, many were ending up in non-graduate roles. Prior to this year there were signs of improvement. The sensible fiscal policy of the Conservative led administrations from 2010 onwards had been rewarded with the signs of growth. There was cause for optimism for sunnier times. And then Coronavirus struck. And, once again it will be the millennials that bear the brunt.
Home ownership is a Conservative dream yet, back in 2018, the Resolution Foundation report found that millennials were 50 per cent less likely to own their own home by the age of 30 compared with the baby boomers born between 1946-1964. Faced with the economic constraints post-Covid that is only likely to get worse. Coupled with the fact that, as of 2017, average pensioner income outstrips those of working families, the threat to the social contract cannot be underestimated.
The welfare system, which operates in the UK, is on a “pay as you go” basis. Workers pay in now to fund benefits for the current crop of retirees, as that generation did for those before them. With individuals living for longer retirees will, inevitably, take out more than they have put in. That is not their fault; it is merely a by-product of improved life expectancy. What results however, is a scenario in which there is a redistribution of wealth towards those that live longest; statistically, this group is not only the longest living, but also the wealthiest in any event. This compounds the issue.
Of course, none of this is to say that there are not those of retired age who are struggling to make ends meet. Nor is it to suggest that the baby boomers have it all easy, enjoying a carefree retirement – far from it. With people living longer and millennials less able to strike out entirely independently, there is a generation above and below that needs their support. Rather than a carefree retirement it is often defined by being a carer to elderly parents and relatives and an alternative bank to their children.
It is with all of these competing factors in mind that we cannot put off revising the social contract any longer. That is not to say it will be easy. Older voters are more naturally Conservative voters; upsetting them goes against the natural instinct of politicians. Likewise manifesto promises have been made and should, in normal circumstances, be honoured. But we are no longer living in normal circumstances.
As we emerge from this crisis, we must use it as an opportunity to think differently on how the social contract works so that it works more fairly for all. The guiding principle must be that no generation should be in a worse position than those that go before them.
So what does this mean in reality?
Well, firstly a re-evaluation of retirement age beyond 65. With increasing life expectancy and improved health in later life, the artificial bar of retirement at 65 no longer makes sense. We must not see older people as less able to contribute; in fact, to the contrary, they have a wealth of experience to impart. Flowing from this is the inconsistency whereby those over the age of 65 are not expected to pay national insurance. There is no good reason for such an exemption and it should be closed off.
The second element for reform is the triple lock. Where once it was the right course of action, that cannot be said any longer. With sluggish wage growth, to maintain the 2.5 per cent provision is no longer defendable. Instead, it should be pegged to life expectancy.
And finally, we must look at social care provision. This is a mighty topic, a full analysis of which will need to wait for another day and another article. But as a starter we should be positively exploring an insurance funded care system. We should also take much closer heed of enhancing the role families play in the provision of care; and this means providing financial recompense to reflect the gratuitous nature of what would otherwise be picked up by the state.
As with everything in life, with time things evolve. The fundamental tenets of the social contract have withstood the test of time but the contract is now creaking under the strain. As the nation emerges, like a phoenix from the ashes of the Covid crisis, now is the time to reshapreshape it for future generations.