British Budget to focus on angry, indebted youth

British Finance Minister Phillip Hammond with a red official box as he exits 11 Downing Street on his way to present his first annual budget statement in the House of Commons in London, UK on March 8, 2017.
British Finance Minister Phillip Hammond with a red official box as he exits 11 Downing Street on his way to present his first annual budget statement in the House of Commons in London, UK on March 8, 2017. PHOTO: BLOOMBERG

LONDON - The tradition never changes: at noon on Wednesday (Oct 22) local time, British Finance Minister Phillip Hammond will step out of his official residence in central London waving a red official box containing his country's new Budget.

Minutes thereafter, ordinary Britons will be informed how much tax they would be expected to pay next year, and what financial entitlements might be in the offing.

Yet although the ceremony will be followed to the letter, the substance and purpose of this year's Budget are radically different. For this is the first Budget in decades in which the plight of Britain's youth will attract most attention.

Although Britain's population is growing, it is also growing older, so the young are by no means the most important population group; those aged 25 or below account for only 29 per cent of the population. And at least according to national statistics, the youth enjoy good working opportunities; unemployment has fallen to 4.3 per cent of the labour force, the lowest in half a century.

Still, Britain's youth are angry. The current generation is the first since the 1950s that is no longer able to look forward to a better life than its parents, largely because the real prices of education and housing have risen much faster than their earning opportunities.

And Britain's young adults are becoming more vocal in expressing their displeasure. Less than 40 per cent of those aged 18 to 25 regularly voted in general elections, the lowest level of participation among all age groups. But at last June's General Elections, 64 per cent of youngsters cast their ballots.

And while the opposition centre-left Labour Party always enjoyed its strongest support among the young, this has widened dramatically this year, with Labour scooping up more than two-thirds of all the young votes. That had profound impact on Britain's political landscape, and was a major contributing factor in Prime Minister Theresa May's surprisingly poor electoral performance, particularly in urban constituencies.

Mr Hammond is rumoured to consider unveiling on Wednesday a number of major initiatives to attract young voters back to the ruling Conservatives' fold. The first is help with university education, which almost half of Britain's youth now attend. Tuition fees for most university courses are now £9,000 a year (S$16,150), competitive by global standards, but still a heavy burden on a poor family.

Government-subsidised loans are available, but they tend to saddle graduates with huge debts to repay precisely when they are expected to establish families and get on the property ladder.

"A typical graduate will leave university with whopping debts of £46,000, while young people from households in the lowest 40 per cent of earners will graduate with debts of nearly £52,000," says Sir Peter Lampl, who heads the Sutton Trust, a charity looking at social mobility questions.

Mr Hammond could consider abolishing tuition fees altogether; they were only introduced for British students in 1998. More likely, he will introduce progressive exemptions of tuition fees for people from poorer backgrounds. There is also growing pressure on him to reduce the current debt overhang on the existing generation of young adults; a variety of recent surveys indicate that over half of all these debts are still not settled years after they were contracted.

But, as Mr Hammond knows, that will mean little unless he tackles the equally big hurdles of jobs and housing. Although there are plenty of jobs, Britain's Chartered Institute for Personnel and Development estimates that, out of all those who graduated from universities in 2015, no less than 48 per cent ended up in jobs that did not require a university degree at all.

And housing is another hurdle. Two decades ago, only a fifth of Britain's young still lived at home by their late twenties. Today, more than a quarter of youngsters stay with their parents, since they have no chance of buying a place when the average price of a flat in Britain starts at £250,000.

Mr Hammond says that 217,000 "additional dwellings" were built last year and vows that the government would use the powers of state to get "missing homes built" with a view to accelerating construction to a rate of 300,000 next year. But he refuses to accept a suggestion by his Cabinet colleagues for a separate £50 billion fund specifically for accelerated housing construction.

And the reasons for his caution go beyond the traditional reluctance of any finance minister to commit to future spending projects. The Budget for next year is the final one for Britain covering a full year of EU membership and with no agreement in sight on what will follow Britain's departure from the Union, many of the figures in the Budget are unlikely to stand the test of time.