Class of 2007: Inaction sinks the IPOD generation

This is the third annual report by Reform assessing the difficult economic position of young people. This generation, is the IPOD generation - they are increasingly insecure, pressurised, over-taxed and debt-ridden. It faces an increasing tax burden but is likely to receive fewer benefits from the State.

These increased pressures come at a time when all of the skills and talents of young people needs to be utilised for continued economic growth. An increasingly competitive globalised economy will make them vital for future prosperity. Several specific factors can be identified that are conspiring to undermine their position:

Firstly, specific features of the economy are increasing the financial pressures on young people. The availability of credit and rising costs of a university education are increasing levels of debt faced by this generation. The astronomical rise in house prices is also a major contributory factor as higher levels of debt need to be taken on to purchase first homes. The rate of this house price rise has prevented many young people from getting onto the housing ladder, but they have still been affected financially as a result of increasing rents.

Secondly, fundamental demographic changes are increasing the pressure on young people. As a result of falling birth rates the population as a whole is ageing. This means a smaller number of workers are available, through general taxation, to fund public spending. These changes are also likely to increase the spending burden, as an increase in older people places more pressure to invest in areas of high public expenditure such as healthcare and pensions.

Thirdly, specific decisions have been made by the UK Government to increase tax and spending in this decade. Total Managed Expenditure has increased by around 43 per cent since 1997, mostly with the aim of improving public services. The results of this spending have not, however, been felt equally across the generations. For example, in 2003-04 annual per capita NHS spending for the 16-44 age group was around £350; for those over retirement age, it was £2,650.

This report repeats the audit of key indicators of the pressures that are being placed on young people. An analysis of these factors concludes that the position of young people in 2007 is worse than it was in 2006. For example, the cost of an average first time buyer property is now 8.3 times the median salary compared to 8.1 times in 2006.

As a result of this analysis, the report questions the wisdom of current tax and spend policies. It concludes that a new direction is needed, and urgent action is needed to reduce the economic pressures on young people. The forthcoming Comprehensive Spending Review presents the opportunity to do this.