Intergenerational Transfers and Public Expenditure on the Elderly in Modern Britain

Abstract

ABSTRACTIn the United States, much attention has recently been directed to the issue of whether the welfare system has become over-generous to the retired population, at the expense of families with children. The proportion of the US elderly population living in poverty has fallen significantly in the last fifteen years while the number of poor children has increased rapidly, and it has been suggested that this lack of investment in the next generation of workers may have disastrous longterm consequences for the U.S. economy. This paper considers whether similar trends are evident in Britain. It reviews data on the poverty and income of the elderly population, and finds little unequivocal evidence of relative economic gain over the last two decades, although it is clear that many children have suffered from the recent rise in unemployment-induced poverty. It also looks at direct public expenditure on the elderly through both the pension and the health and personal social services systems, and finds no evidence of a transfer of public resources away from children and towards the elderly population. The paper concludes that the British welfare state has been remarkably neutral in its allocation of resources between generations, and that, in the British context, any discussion of inter-generational conflict for welfare resources establishes a false dichotomy, because economic inequality within broad age groups is much greater than inequality between age groups.