[October 29, 2007] Reform: The Government has treated the IPOD generation with "indifference", "inaction" and "neglect"; Typical graduate faces an effective tax burden of 49 per cent in 2012 Tweet (M2 PressWIRE Via Thomson Dialog NewsEdge) RDATE:30102007 The Government treated young people in the UKwith "indifference", "inaction" and "neglect" in 2007 according to a new report by the independent think tank Reform. The report shows that while other countries are facing up to the economic challenge of ageing populations, the Government's fiscal policies are mortgaging the future of a generation. Instead the UKshould rein in public spending, set new fiscal rules and introduce targeted tax reductions to give young people room to invest in themselves. The report is the third of the think tank's annual reports on what it has termed the IPOD generation: 18-34 year-olds who are Insecure, Pressurised, Over-taxed and Debt-ridden. It shows that, in many respects, 2007 was the year in which the IPOD generation took centre stage in global politics. Led by the US, much of the world recognised the need to protect young people from the rising costs of healthcare and pensions and from higher borrowing. The Presidential election in Francewas arguably the first IPOD election. The arrival of a new Government raised the hope that the UKwould join the global consensus; the Prime Minister made helping first-time buyers one of his three policy priorities. But the Comprehensive Spending Review / Pre-Budget Report 2007 dashed these hopes. Instead of setting a new path of fiscal responsibility, it increased spending on healthcare and pensions and raised levels of borrowing. The Government has lost control of borrowing in recent years. For the five financial years from 2002-03 to 2006-07, its initial forecasts underestimated the true level of borrowing by a total of GBP121 billion. Higher spending and borrowing will impose upwards pressure on taxation. This is particularly worrying as a typical graduate is already set to face an effective tax burden of 49.1 per cent. So heavy a burden limits the IPOD generation's capacity to invest in the skills that they require to be competitive in today's labour market. This will have negative repercussions for the economy. A new approach, based on public spending control, targeted tax reductions and improved education, would allow young people to make a full contribution to both the economy and society. The report's key points are: * In many countries, 2007 was an extremely positive year for the IPOD generation. International institutions and policy makers - including Ben Bernanke, Chairman of the US Federal Reserve - both identified the IPOD challenge, and set out the right response to it: public spending restraint, reductions in tax burdens and lower borrowing. * The UKhas ignored the global analysis. Policies which tipped the tax / spend balance against young people - higher health and pensions entitlements and higher public spending overall - have remained in place. Specific decisions in both the Pre-Budget Report & Comprehensive Spending Review (PBR & CSR 2007) and the Budget have worsened the situation. * PBR & CSR 2007 pledged major spending increases on both healthcare and state pensions. NHS spending will increase from GBP90 billion to GBP110 billion (cash terms) by 2010-11. State pensions will increase in line with earnings from 2012, or at the latest from the end of the next Parliament. * For the five years 2002-03 to 2006-07, the Government's initial projections underestimated the eventual true level of borrowing by a total of GBP121 billion (about GBP4,800 per household). * Rather than helping first-time buyers, the proposal of an 18 per cent rate of capital gains tax will help owners of second homes and buy-to-let investors. * The difficult position of UKyoung people in relation to housing, employment and debt means that the Government's fiscal decisions are even more questionable. Young people are the least likely age group to start a new business. * In 2012, a typical graduate will face an effective tax burden - including near-compulsory payments on higher education and pensions - of 49 per cent. * A new approach is required. Specific recommendations include: * a new concept for economic policy making - the "investment margin", which measures the resources available to individuals to spend on training, healthcare and retirement; * a "growth rule" for public spending which would deliver a rate of public spending of 35 per cent within two Parliaments; * copayments for healthcare; * targeted tax reductions, with one option being a much higher income tax personal threshold of up to GBP15,000; and * education reform based on parental choice. Nick Bosanquet, Consultant Director of Reform and Professor of Health Policy at Imperial College London, said: "Protecting today's and tomorrow's young people is a defining modern political issue. The IPOD generation have been reduced to galley slaves in the public spending empire of the baby boomers. The Government is in the process of mortgaging the future of a generation." Andrew Haldenby, Director of Reform, said: "The Government fails to face the facts: high taxation and high public spending impose massive burdens upon both young people and the economy. The rest of the world has outlined a better approach; an approach which will finally liberate the IPOD generation." For more information, please call Andrew Haldenbyon 020 7799 6699 or 07932 656847 or Helen Rainbowon 020 7799 6699 or 07921 368305 Ends Notes for editors 1. Reform is an independent, non-party think tank whose mission is to set out a better way to deliver public services and economic prosperity. We believe that by liberalising the public sector, breaking monopoly and extending choice, high quality services can be made available for everyone. 2. The report is titled Class of 2007: Inaction sinks the IPOD generation. It is available at: http://www.reform.co.uk/filestore/pdf/071025%20Class%20of%202007%20Inact ion%20sinks%20the%20IPOD%20generation.pdf 3. The report's authors are: Professor Nick Bosanquet, Professor of Health Policy at ImperialCollegeLondonand Consultant Director of Reform. Andrew Haldenby, Director of Reform. Peter Hoskin, Reform's Economics Research Officer. Helen Rainbow, Reform's Health Research Officer. Zoe Gannon, an intern with Reform in Summer 2007. 4. Reform has issued two previous reports on the IPOD generation: Class of 2005: the IPOD generation (2005), and Class of 2006: a lifebelt for the IPOD generation (2006). CONTACT: HELEN RAINBOW, Health Research Officer, REFORM Tel: +44 (0)20 77996699 Fax: +44 (0)20 72334446 Tel: +44 (0)7921 368305 (mobile) WWW: http://www.reform.co.uk ((M2 Communications Ltd disclaims all liability for information provided within M2 PressWIRE. Data supplied by named party/parties. Further information on M2 PressWIRE can be obtained at http://www.presswire.net on the world wide web. Inquiries to [email protected])). Copyright 2007 M2 Communications Ltd. 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