Generation Debt: The High Price of Fiscal Policies on Young People

As the UK faces a looming financial dilemma, Chancellor Rachel Reeves’ upcoming Budget raises questions about whether it will unintentionally transform Generation Z into Generation Debt. The debate centers around necessary tax increases to manage the national debt, which currently hovers just under 100% of the UK’s GDP. Amid rising student loans and stagnant homeownership rates, many argue that younger generations could suffer from having to shoulder the financial burden of increasing government debt.

The discussion highlights that while the national debt could exceed 250% of GDP in the next 50 years without intervention, some economists believe this scenario may trigger a bond market crisis, necessitating a change before debt escalates uncontrollably. The Office for Budget Responsibility (OBR) asserts that the trajectory of public finances is unsustainable, largely due to an ageing population—a demographic shift that necessitates more spending on essential services like the NHS, social care, and the state pension.

Currently, as the number of individuals over 65 is expected to double, the government will face increased pressure to support this demographic, potentially exacerbating the wealth gap between older and younger generations. According to the Resolution Foundation, while older adults have seen their benefits increase by an average of £900 annually, those under 65 have faced cuts amounting to £1,400, illuminating the trend of government policies that favor older citizens at the expense of younger ones.

The contentious triple lock on the state pension guarantees higher yearly increases based on earnings or inflation, contributing to greater long-term spending pressures that future working-age individuals will ultimately pay for. The projected rise in state pension spending could climb from 5% of GDP today to nearly 8%, meaning younger taxpayers will be pivotal in covering these expenses.

However, younger generations might also benefit if the triple lock remains intact when they retire. Polling indicates that the younger demographic largely supports this policy, despite its long-term implications on public finances.

The balancing act between addressing national debt, maintaining benefit integrity, and ensuring fair treatment between age groups continues to provoke debate. As fiscal policies evolve, the question remains: will these measures genuinely pave the way for a secure future for Generation Z, or will they inadvertently trap them in a cycle of debt?