From anti-ageing creams to cosmetic “tweakments”, there are plenty of ways we can to try to wind back the years. But if it were possible to turn back the clock, would you really want to be a 20-something right now?
The escalating cost of living crisis is squeezing the youngest generation of workers especially hard. As a cohort, they are saddled with high and rising student debt, weak earnings growth and impossibly high property prices.
Never mind saving enough to buy a home. I fear the high cost of renting means many will be more likely to be living inside somebody’s pension than be able to afford to pay into their own.
As “Awful April” looms, higher national insurance and the frozen student loans repayment threshold will take a bite out of pay packets, just as the cost of everything from energy bills to transport costs shoots up.
Yet by ’Orrible October, the average annual energy bill is predicted to exceed £3,000 as the war in Ukraine intensifies inflationary pressures, including the cost of the weekly shop. The Bank of England this week warned it expected inflation to hit 8 per cent by June.
This will be financially catastrophic for millions of Britons on low incomes, and chancellor Rishi Sunak is coming under huge pressure to do more to cushion the blow at the Spring Statement next week.
I do not hold out much hope, but the Treasury also needs to acknowledge the struggle for younger generations and show them it is listening.
While young professionals at the outset of their careers won’t be facing poverty, their financial horizons are shrinking fast.
As the FT launches the third series of the Money Clinic podcast, I’ve been hearing what our 20- and 30-something listeners have to say about the real-life impact.
This week’s guest, 22-year-old graduate Lil, finds that managing her money is consuming more and more of her time.
“I can’t wait for the day where I don’t have to have the constant pressure of being careful,” she says. She’s not talking about a big blowout — just the luxury of an occasional treat as anything barring essentials is expunged from her day-to-day budget to cover rising bills.
As Lil says on the podcast, what worries her the most is that saving for a rainy day is something she can no longer afford to do. She’s increasingly having to turn to her savings for small emergencies, but cannot replenish them at the same rate.
She hasn’t considered opting out of her workplace pension yet — but come the autumn, I wonder how many might be tempted?
As a young renter living in a house share, her efforts to budget through the crisis could be undone if other flatmates are not so careful. If one can’t make the monthly rent or bills, the rest will have to cover the loss or see their credit scores plunge (this could also come back on parents who have signed up as rental guarantors).
Could digital nudges help manage this? NatWest has just launched a new app called Housemate (although customers of any bank can use it). Powered by Open Banking, the free service enables renters to split bills and send “who owes what” payment requests and reminders.
While young renters like Lil are understandably anxious about how much more expensive life could yet become, the fear is more acute for those with even less slack in their budgets — those on the lowest incomes.
Even though Sunak has the scope for a big fiscal giveaway next week, most economists think that — other than a temporary cut to fuel duty — he will keep his power dry for the autumn Budget, and instead focus on measures to help businesses in the hope this will stave off a future recession.
As the government waits to see how the energy crisis will unfold between now and the next price cap increase in October, they will hope April’s £150 council tax rebate will be enough to keep voters happy — for now.
There is huge pressure for this to be increased for the worst affected households, and for October’s £200 “heat now, pay later” scheme to be converted into a non-repayable grant. I fear both are about as likely as the chances of a U-turn on national insurance or the £20 universal credit uplift.
But if the chancellor does nothing to help those on the lowest incomes, by October, problem debt will become the only certainty for millions of people — from the lowest earners to young renters and many others besides.
Christians Against Poverty, one of the UK’s biggest debt charities, is calling on the Treasury to consider pulling other levers to reduce levels of personal indebtedness.
“The government is effectively the largest debt collector in the country, and also the most forceful because of the tools they have available to make deductions from universal credit without conducting affordability checks,” says Gareth McNab, the charity’s director of external affairs.
“Many people don’t know this, but up to 25 per cent of someone’s standard universal credit allowance can be deducted to repay the initial five week advance or collect historic tax credit debts, many of which were run up as a result of faults in the system,” he says.
As more people claim universal credit, CAP says it’s becoming easier to find people and automatically deduct these historic debts.
“Banks and financial services companies have to work with you to ensure all of the debt is yours and find an affordable repayment plan — but the government doesn’t have to, and this is causing significant distress for the poorest households,” he says.
CAP is campaigning for the same affordability assessments used for debts owed to banks and credit card lenders to be applied to debts owed to the state — something I am sure many FT readers will be staggered to learn is not already the case.
This would go some way to alleviating the cost of living crisis for the poorest, but looking at the scale of the price rises to come in October, it’s not going to be enough.
If it were possible to measure levels of financial anxiety, I am sure they would look as dramatic as charts showing the huge spikes in global commodities prices — something the chancellor needs to recognise at the despatch box next week. Given this precarious outlook, would you want to trade places with someone in their 20s? As a 40-something with a property and pension savings that have been hugely boosted by the asset bubble, I’m not only prepared to live with the wrinkles, but higher taxes to help soften the blow on those with the least.
Claer Barrett is the FT’s consumer editor: claer.barrett@ft.com; Twitter @Claerb; Instagram @Claerb
Source: Economy - ft.com
