Think tank calls for tax shift from younger workers to older people and wealth

The Institute for Public Policy Research (IPPR) has urged the government to enact policies that shift some of the tax burden away from young and working-age people towards property, older people, and wealth.

The think tank warned that an ageing population will account for almost 80 per cent of additional economic pressures facing the UK by 2075, describing the demographic challenge as “stark”.

It estimated that the cost of the state pension alongside higher health and social care costs could result in adding nearly 10 per cent of GDP to fiscal pressures by 2075.

The paper, authored by University of Oxford professor of comparative democratic institutions, Ben Ansell, argued that these pressures made tax reform increasingly unavoidable.

Ansell noted that governments had been relying on frozen thresholds, stealth taxes, and smaller levies and relief changes to reform the tax system, resulting in a complex system that was tilted towards taxing work and younger earners while protecting accumulated wealth and older homeowners.

He therefore called for several changes to move some of the tax burden away from younger workers and towards wealth, property, and unearned gains.

These changes included equalising capital gains tax with income tax rates, alongside an investment allowance to protect normal returns.

Additionally, Ansell recommended extending national insurance to older earners, including by applying the existing 2 per cent national insurance surcharge on earners to pensioners, and replacing council tax and stamp duty with a proportional property tax set at a rate of 0.65 per cent.

The paper also warned that work needed to be done to prepare the tax system for an AI-driven economy, including exploring a progressive consumption tax, an international AI token tax, and the taxation of unearned returns to AI capital.

“Britain cannot meet the fiscal challenges of the coming decades simply by asking people in work to pay more and relying on another round of stealth taxes,” said Ansell.

“Ageing is going to become by far the biggest source of pressure on the public finances. Yet our tax system has increasingly shifted responsibility towards younger workers while protecting many of those who have benefited most from decades of rising property and asset wealth.

“Reform is politically difficult, but avoiding it has simply given Britain an ever more complicated tax system.

“We need a new fiscal contract: one that raises the revenue the country will need, shifts more of the burden from work towards wealth and property, and is honest with the public about who pays and why.”

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