Report calls for UK tax reform targeting older demographics
Britain must rebalance its taxation away from younger workers and towards property and older demographics, according to a report by an influential policy think tank, reports BritPanorama.
The Institute for Public Policy Research (IPPR) warns that an ageing population could account for nearly 80 per cent of the additional fiscal pressure confronting the UK by 2075.
Authored by Oxford professor Ben Ansell, the paper advocates a new “fiscal contract,” proposing extending national insurance (NI) to older earners and replacing council tax and stamp duty with a single proportional property tax.
These recommendations follow statements from Prime Minister Andy Burnham, who has not ruled out tax increases in the upcoming Budget, asserting on ITV News that he “won’t be unrealistic” regarding public finances.
Questions linger over how Labour’s pledges, including £5 billion in defence spending and major social care reforms, will be financed.
Prof Ansell’s report emphasizes the urgent need for tax reform, given the pressures presented by an ageing population. “Britain cannot meet the fiscal challenges of the coming decades simply by asking people in work to pay more and relying on another round of stealth taxes,” he remarked.
He elaborated, stating, “Ageing is going to become by far the biggest source of pressure on the public finances,” highlighting a shift of responsibility that disproportionately affects younger workers while shielding those who have accrued wealth through rising property values.
Ansell stressed the importance of reform, indicating that avoiding it has complicated the tax system. “We need a new fiscal contract: one that raises the revenue the country will need, shifts more of the burden from work towards wealth and property, and is honest with the public about who pays and why,” he asserted.
The report illustrates that industrialized nations, including the UK, face the challenges of an ageing population, with the proportion of over-65s expected to rise to 27 per cent by 2074, up from 14 per cent in 1974 and 18 per cent in 2024.
Assuming benefits remain constant, costs for state pensions could escalate from 5 per cent of GDP to 7.7 per cent, with ageing potentially adding almost 10 per cent of GDP to costs by 2075 when combined with healthcare and social care.
While costs for older citizens are set to increase, the IPPR notes this demographic remains among the most tax-advantaged groups, primarily due to exemptions from national insurance contributions.
Additionally, the report highlights that younger working individuals, especially those repaying student loans, are among the most affected by the current policy landscape, struggling to achieve the same housing access as older generations.
To address these issues, Prof Ansell proposes several measures: extending the 2 per cent NI surcharge on workers under 65 to pensioners; replacing council tax and stamp duty with a proportional property tax of approximately 0.65 per cent; and equalizing capital gains tax with income tax rates, alongside an investment allowance for normal returns.
He further calls for preparations for an artificial intelligence-driven economy, which could alter employment needs and necessitate new tax models.
As the discussion around tax and expenditure intensifies, the recommendations may be pivotal in navigating the fiscal demands of the coming decades.
