Canada promises generational fairness

Canada has made a historic promise to deliver “fairness for every generation” in its 2024 budget. IF CEO and Co-founder, Liz Emerson, weighs in on this milestone and what Canada and the UK can learn from each other.

Canada – a policy win for younger generations

For the first time, a Canadian government has promised “fairness for every generation” in its federal budget. It wasn’t just a passing phrase. It’s the title of Canada’s entire 430 page budget for 2024.

This is a massive win for intergenerational fairness in principle. Governments around the world should take note that Canada has placed such a high priority on fairness for every generation that it organised its fiscal framework around this principle.

It’s also a win for our good friends at Generation Squeeze. The team has worked tirelessly for more than a decade to raise the issue of intergenerational fairness within Canadian policymaking and wider society.

The UK and Canada have (sadly) lots in common when it comes to generational tensions in public policy. Canada’s new budget shines a light on some of these issues, but others are left in the dark. As a leader in an organisation that works in common cause with Generation Squeeze, I wanted to share some reflections on the importance of this moment – while also sounding a note of caution about what it will take to truly deliver, informed by our experiences in the UK.

Housing, housing, housing

Central to Trudeau’s budget is a pledge to fix the housing crisis facing younger Canadians. The issues are similar both sides of the pond: the inability to be able to afford a home in the first place; a lack of tenancy protection; a lack of tenant security; and the inability to use rental payments as proof of credit-worthiness for mortgage borrowing.

“This is about protecting renters. But this is also about generational fairness – making sure Millennials and Gen Z, who are most likely to rent, get a level playing field in the rental market,” stated Trudeau. His policy pledges are similar to those on the agenda in the UK: increase supply; encourage investment; level the playing field; help tenants and particularly the rapidly increasing number of homeless households. It all sounds good, but timing will be everything. Time to take note from the UK.

The Renters Reform Bill

Here in the UK, younger generations have been calling for greater tenancy protections for more than a decade as house prices soared, supply withered and rents have gone through the roof – up 29% in just three years! That pressure has culminated in the Renters Reform Bill, currently making its way through the lower and upper houses. Its long and tortuous legislative journey started back in 2018 when then Prime Minister, Theresa May, promised the end to unfair evictions and announcing the biggest change to the private rented sector for a generation. These followed: a Green Paper (a government call for ideas); A General Election manifesto pledge – “a better deal for renters”; a global pandemic forcing a moratorium on evictions; a 2020 call to end no-fault Section 21 evictions; a 2021 White Paper (proposal for future legislation); another 2022 White Paper; a government response; and finally the Renters Reform Bill in 2023, which stalled that same year but has since been re-introduced to Parliament, albeit in a watered down form. And while English tenants continue to wait for the protections promised, their rents continue to increase.

If the Bill does make it into Law, and while the end of no-fault evictions still has no set deadline date, there will be positive protections for English tenants such as: greater security of tenure; the need for landlords to prove they have a right to remove tenants; a new Housing Ombudsman service to manage disputes; the right for tenants to have pets; and refusing a housing benefit claimant will become illegal. But, the point remains that the journey to full legislation is long, arduous, and fraught with obstacles, so young Canadians need to take note and keep pressure on legislators to ensure that Trudeau’s housing promises are delivered quickly.

It’s age as well as class

Paul Kershaw, Founder of Generation Squeeze, is passionate about the importance of a national budget pointing to the need for a generational lens on government decisions, because looking through this lens is crucial for an accurate diagnosis of the pressures Canada is facing. As Gen Squeeze’s response to the budget states,

“Never before has a federal budget grappled with how class dynamics have been distorted by how a person’s age affects their standing in the housing system. Income matters less than in the past. Secure housing and home equity matter more, privileging those of us who bought into the market decades ago.”

In the UK, British political parties – and governments in waiting  –  are finally realising that the housing crisis facing younger generations is now so acute that it is stalling the economy, cutting spending in the real economy, reducing fertility and exacerbating lower wellbeing and increasing mental ill-health among the younger working-age population who are increasingly fearful of being unable to afford to keep a decently-priced roof over their heads. An unprecedented number of young adults now live in the family home, unable or unwilling to move on, move out, as is their right of passage. The UK rental market is now so pro-landlord that grown-up 20-something workers can be asked for parental guarantors, proof of pay slips, even six-month deposits, for the privilege of paying one-third or more of their salary often for a small room in a shared flat.

So much more than housing

While both IF and Gen Squeeze view the housing crisis as the epicentre of intergenerational unfairness, there are many other unfairnesses in the UK that are pulling younger generations down: stagnating wages both pre- and post-Brexit; sky-high taxation on wages but low taxation on wealth; unprecedented student debt levels along with record levels of interest charged on student loans; and unaffordable childcare costs. And that is before the cost-of-living crisis, environmental degradation and the massive injection of investment required to move the economy to a zero carbon economy. Many of the same issues plague younger and future generations in Canada, contributing to their deteriorating wellbeing.

But the elephant in the room continues to be the UK’s rapidly ageing population, with people living longer, living longer unwell, and needing greater welfare spending during old age via our free-at-the-point-of-use National Health Service. Trends which are also playing out across the ocean in Canada.

That ageing is also placing pressure on our different pension systems. Whereas older generations paid less into their pensions, were able to retire earlier and are receiving more in pension payments, younger generations are having to contribute more towards their pensions, to retire years later and receive less in pension payments.

The grey vote 

In spite of the intergenerational fairness fanfare, older Canadians have, according to Generation Squeeze, still come out of the 2024 budget better than younger generations. In 2023, Canadian spending on each person over 65 years was 5.5 times the investment in younger Canadians. In 2024, that gap has closed but is still 4 times the amount invested in under-45s.

Meanwhile, in the UK, younger generations continue to be expected to support the richest generation ever born, even though the over-65s now own more than two-thirds of the country’s housing wealth with 3 million (1 in 4 over-65s) currently living in millionaire households thanks to their housing and pension wealth. Still our government has continued to reward that generation with a near 20% increase in the State Pension over the last two years alone; as well as offer other “universal” entitlements many older Brits could afford to go without but refuse to give up – such as free NHS prescriptions, free eye tests, free bus travel and winter fuel payments. So great is their generational entitlement that old-age activists now state that they should not have to pay tax on their annual pensions when they hit the same income tax threshold as younger working-age generations!

Intergenerational fairness wins

In spite of the slow progress in the UK, one of IF’s biggest wins has been to encourage previous governments and civil servants to better measure government spending by age, which allows for better analysis, better comparison by age and thus the ability to identify the need for a fairer distribution of spending across the generations. That’s something Generation Squeeze is still pushing for, to equip Canadians to assess whether policymakers are finding the right balance in promoting wellbeing at all ages.

Another IF win has been the decision by the Cameron-led government to introduce a stamp duty levy on second home purchases in order to dampen demand for buy-to-let mortgages and level the playing field between first-time buyers and housing investors.

Fast forward to the current government and here too, there has been an acknowledgement that “work” has been unfairly heavily taxed by both Income Tax and National Insurance contributions (NICs). IF therefore welcomed the recent reductions in NICs rates from 12% to 10% to 8%, but the lost tax revenue should be recovered through higher taxation of wealth and income from wealth.

Cross-party consensus is needed when all parties face the same challenges

Have governments in Canada and the UK finally awoken to the younger electorate, or has the younger electorate finally woken up the governments? We will see in forthcoming General Elections in each country.

Weaponising policy to attract the grey vote may not bring in the aged votes politicians have banked on over the years. The fiscal issues are now so great – thanks to changing old-age dependency ratios and up-turned population pyramids – that cross-party consensus may be the only way forward. As Generation Squeeze observes in its recent budget analysis, “today’s unparalleled increases in retirement spending will be a major budget constraint for whomever wins the next federal election. Any party promising to balance the budget easily without tax increases or gutting spending on retirees ignores this hard truth.”

In both the UK and in Canada, we need political parties to recognise that generational fairness is not a partisan issue in order to draw up a new social contract that is fair and equitable to all generations today, as well as those to come.

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