Straight Outta Richmal Crompton
The 'Just William' books were read by a generation who also grew up with the security of a functioning social contract. Today's young people are facing a very different future.
The author Richmal Crompton published 38 ‘Just William’ books between 1922 and 1970, chronicling the adventures of a young boy who was always getting into trouble but usually came out on top. Several generations of Britons grew up with these books. In parallel, they grew up with the expectation that their lives would be better than their parents, and that hard work would secure them a comfortable lifestyle. This expectation was largely met; the postwar generation of ‘baby boomers’ experienced an unprecedented era of peace and prosperity, benefiting in particular from high employment, generous pensions, and cheap housing whose value increased precipitously during their lifetimes.
However, subsequent generations have not been so lucky. The postwar social contract was already bending out of shape by the start of the 21st century, not least as a result of exorbitant house prices. And that was before it was hit by the multiple shocks of recent years, from the 2008 financial crisis and austerity to Brexit, COVID, Russia’s invasion of Ukraine and the cost-of-living crisis.
Looking back from the vantage point of 2025, the cosy mid-20th-century view that everything would turn out all right seems impossibly quaint. Leaving aside the cocktail of existential risks that swirl in the future, from climate breakdown to the impacts of artificial intelligence, there’s a severe shortage of ‘ordinary’ hope for most young people today. Unless they can expect a big bung from the ‘bank of mum and dad’, today’s school-leavers are staring down the barrel of insecure work and unaffordable housing, making it hard to envisage a future of financial security – and university graduates are not vastly better off.
For most young people, the idea of saving enough into a pension to fund a long and luxurious retirement is a distant dream. At the same time, many of today’s retirees are enjoying exactly that. Not all of them are sunning themselves on multiple foreign holidays each year; 16% of pensioners are living in poverty. However, this proportion is far below the 28% of pensioners who were in poverty in 1994, and the 30% of children who are in poverty today.
In a recent article in the i paper, the journalist Hannah Fearn opened up about how she envied her parents for having the pension and retirement that she would never be able to afford. On the back of the reaction to the article, Hannah and her colleague Andrew on the Oh God, What Now? podcast dedicated an episode to the topic, and I was invited on as a guest. The episode will be out tomorrow morning (21 October).
Below is a quick taster of some of the issues that came up in the conversation.
The intergenerational wealth gap is large, and increasing. Real wages for young workers have fallen since 2008, while pensioner incomes have risen due to the ‘triple lock’ on pensions. Until a few decades ago each generation was wealthier than the last, but median incomes for people in their thirties have stagnated in recent decades, while rates of home ownership have halved. The absolute gap in total wealth between the top 10% and the bottom 10% increased by 48% between 2011 and 2019, from £7.5 trillion to £11 trillion, while the wealth gap between people in their early thirties and people in their early sixties more than doubled between 2008 and 2022.
Most of the increase in overall wealth, and thus in the size of the wealth gap, is unearned. What you own – or inherit - is more important than what you earn. 53% of the increase in wealth since 2010 has come about because of ‘passive’ gains (i.e. increases in asset prices), rather than from anything ‘active’ (such as acquiring new assets). However, people tend not to think about how they have benefited from luck (such as being born into a wealthy family, or at a time when property was genuinely affordable), preferring to ascribe their situation to hard work and ‘merit’. Where people do acknowledge the role that luck has played in their lives, they normally focus on bad rather than good luck. This tendency is particularly acute among people aged 50-64. This predisposes people to oppose policy solutions to inequality such as higher taxes on property wealth (alongside the increasing and understandable sense that housing wealth provides people and their children and grandchildren with a form of security in an insecure world).
The ‘great wealth transfer’ over the coming decades will make wealth inequality within generations even bigger than it is today. The “largest handover of generational capital in human history” will see an estimated £7 trillion (in today’s money) pass between generations in the UK over the next 30 years. But this transfer will be very unequal, so the net result is that wealth inequality will reach even higher levels than we see today. Millions of young people will be able to get onto the housing ladder thanks to the ‘bank of mum and dad’, but millions more will not. We’ve published plenty of evidence about the negative impacts of wealth inequality on our economy, society, democracy and environment.
Retirement – and especially the expectation of a long and comfortable one - is a relatively new concept that owes much to a combination of increasing life expectancy and increasing prosperity. Future historians might well look back on the ‘golden age of retirement’ that pensioners have enjoyed in recent decades as a blip. Even if increases in life expectancy slow down, we can expect future generations to have to work for longer in order to fund a comfortable retirement. However, there are huge inequalities in life expectancy, and especially in healthy life expectancy, with people in the richest areas enjoying more than 18 more years of healthy life than people in the poorest parts of the UK. How can forcing everyone to retire later be fair if this is not taken into account?
Policy responses to these problems need to address the underlying wealth inequalities as well as tackling the immediate issues. Revisiting the pensions triple lock is necessary, and radical ideas for reform are worth considering, as well as various ways to help people to build up assets. But any attempt to address intergenerational inequalities must tackle the underlying wealth inequalities that supercharge them. Taxing wealth, including housing wealth, is inescapable. The government will find it hard to build public support for taxing ‘ordinary’ wealth until it has done more to tax ‘extreme’ wealth. Reforming taxes on capital gains and other income from wealth can achieve this while raising much-needed revenues and boosting growth, but an annual wealth tax is also worth considering. Then we need to better tax property wealth (for example through a proportional property tax and ideally a land value tax) and inherited wealth (perhaps by replacing inheritance tax with a lifetime gifts tax on recipients). At the same time, spreading wealth more broadly across society in the first place (for example through higher wages, a citizens’ wealth fund, and the universal provision of public services like childcare or transport) will make us less dependent on redistributing wealth through the tax system. And we need to reduce the ability of the already-wealthy to frustrate these reforms by influencing politics, looking both at the ways that the super-rich can do this (e.g. by donating to political parties and lobbying politicians), and the less obvious but equally pernicious way in which politicians prioritise the interests of the 50% of the population who are homeowners over those of the 50% who aren’t.
Next week we’ll be publishing an update to our Wealth Gap Risk Register, which takes a comprehensive look at the evidence for how wealth inequality is undermining our society, economy, democracy and environment and what we can do about it.