Alexandra Frean, Education Editor
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University graduates will have to hand over almost half their salaries to the taxman within five years, according to a report which shows the escalating financial burdens facing young people.
The “IPOD” generation of young people who are Insecure, Pressured, Overtaxed and Debt-ridden are the victims of an institutional bias that has tipped the balance between taxation and spending against young people in favour of older generations, the report from the independent non-party think-tank Reform says.
It argues that while other developed nations, notably the United States and France, are beginning to address this intergenerational bias and to design their public policy around the interests of young people within an ageing population, the British Government has virtually ignored the issue.
As a result, the young are being increasingly asked to shoulder the burden of increased public spending on pensions and health services, which are primarily used by a growing number of older people.
The report calculates that a new graduate on an average starting salary of £27,155 would be left with only £13,862.26 a year to spend after student loan repayments, direct and indirect taxation, national insurance, pension contributions and council tax.
Nick Bosanquet, Professor of Health Policy at Imperial College and a consultant director at Reform, said: “We have to be careful of piling more and more of the burden of public spending on younger taxpayers. We need to put the issue of intergenerational fairness at the forefront of public policy.”
The solution, he said, was to reduce the overall tax burden from the current level of about 42 per cent to less than 40 per cent. “Over the course of two parliamentary programmes we would hope to get state spending as a percentage of GDP [gross domestic product] down to 35 per cent to reduce the tax burden on the younger generation without increasing it on the older generation,” he said.
Andrew Haldenby, the director of Reform, has called for the introduction of a new concept for economic policymaking – the “investment margin”, which measures the resources available to individuals to spend on their own training, healthcare and retirement. A higher investment margin would free up the IPOD generation’s capacity to invest in the skills that they require to be competitive in today’s labour market.
It would also make them less reliant on their parents for help to get a deposit for their first home. The report points out that property prices for first-time buyers are eight times the average earnings of those aged 22 to 29, up from five times in 1999.
The report said that although Gordon Brown’s elevation to Prime Minister had raised hopes that the IPOD generation would be a priority for the Government, recent tax reforms disproportionately benefit older people.
One of Mr Brown’s early priorities was to help first-time buyers. But the recent Comprehensive Spending Review/Pre-Budget Report introduced an 18 per cent rate of capital gains tax. This will be of more help to older people as those who own a second property, who tend to be older, will pay 22 percentage points less in CGT if they sell the property.
A reduction in the basic rate of income tax from 22 to 20 per cent as of April may appear to benefit younger people, but it has been funded largely by removing the 10 per cent tax rate, which will disproportionately affect young people on lower salaries.
The report recommends targeted tax reductions, such as a much higher personal income tax threshold of up to £15,000. The report, The Class of 2007: Inaction Sinks the IPOD Generation, is the third in a series of Reform reports.
Vince Cable, acting leader of the Liberal Democrats and Treasury spokesman, said that Mr Brown’s obsessive tinkering with the tax system and introduction of top-up fees meant that graduates on modest salaries now face an unacceptably high tax burden.
“This report is a damning indictment of Labour’s treatment of young graduates,” he said. “A decade under Labour has left many young people facing crippling student debt, high council tax bills and, following the abolition of the 10p rate, higher levels of income tax.”

Depressed iPod generation
49% typical tax burden of a new graduate in 2012
Second homes
1.9% proportion of second-home owners who are aged under 30
60% proportion of second-home owners who are aged over 60
Property
5.2 times average earnings cost for average first-time buyer property in 1999
(£71,623)
8.3 times average earnings cost for average first-time buyer property in 2006
(£145,970)
Men at home
50% of men aged 20 to 24 living with their parents in 1991
58% of men aged 20 to 24 living with their parents in 2006
Women at home
32% of women aged 20 to 24 living with their parents in 1991
39% of women aged 20 to 24 living with their parents in 2006
Tax
£5,225 current income tax personal threshold
£15,000 ideal income tax personal threshold
Source: Reform – The Class of 2007: Inaction sinks the iPod generation

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University education for the most part is just a way of keeping a million young people off the dole. Then making them pay for it all when they do eventually find jobs. Its a brilliant scheme indeed. Our universities are currently churning out huge numbers of graduates for which there are no suitable jobs in their areas of study. For example, art and design: 10 graduates to 1 job.
It is a complete waste of money to educate people who will never work in their chosen profession. The lack of skilled labour now has to be satisfied by migrant workers. It is time that we reduced universities courses which are not benefiting the economy, and with the money saved create free education for those who wish to study or train in areas where we have a shortage of skills.
Universities are now profit driven businesses, which focus on bringing in as many students as possible, and investing as little as possible in staff and facilities. In many cases a UK degree is worth less than the paper............
klara jirackova, Newcastle,
If I was a recent graduate I'd emigrate to somwhere where there is a greater respect of their achievements and abilities - and I would do so pronto!!
JPR, Ryde,
Clearly the 27k is adjusted to fr 2012 to allow for wage inflation until that point
Chris, Birmingham,
I sincerely hope that these kids remember what this Government has done to them when they come to vote at the next general election. It was THIS GOVERNMENT that promised NOT TO introduce University fees. Remember, remember, remember.....you can't believe ANYTHING that they say. It has been one lie after another. I don't think that they even know the truth.
judy, Liverpool, england
The young are shelling out for all the fnal salary pensions..hey ho but not for my very expensive money purchase scheme and all those oap's who have never contributed a been towards thieir retirement..tip of the ice berg..this pension thing and crippling young folk financially..
toni bates, havant,
The person who posted about moving to Seattle (or the US in general) is right. For graduates with engineering and science degrees a starting salary of $70k-$85k would be the norm. Plus you pay a lot less in tax and most corporations have health care insurance that out classes anything I've seen from the NHS.
Though of course you have to get the job and then get a visa...
James, Seattle, USA,
The problem stems from voter apathy among young taxpayers. Politicians devise measures that will deliver their party the maximum number of votes. There is no incentive to look after the iPod generation, because of the low voter turnout among this demographic.
Rebecca, London,
Hang on, I'm a recent graduate with a decent degree (Masters in Engineering, not some joke of a BA in David Beckham Studies) and I'm on £21k - I could have gotten up to £23k if I'd taken a less appealing job in a worse location, but not realistically a lot higher as a starting salary.
Is the mean graduate starting salary *really* £27k? Or is that just for stockbrokers in London?
Alex, Bristol,
I agree completely with this and know so many British graduates my age who have either already emigrated (like me) or are making plans to do so. Why work hard all our lives for so little reward?
V Jones , Brussels, Belgium
William P. from Paterson, N.J., if Hillary is elected we, in the USA, will be in the same tax swamp as the Brits.
Bill Rouse, Tampa, Florida
Socialism at its finest.
Of course, this is not to say that America doesn't have problems, we do. But I know if I was diagnosed with cancer, I'd be much more likely to survive it in America than Britain. I'd rather be poor and alive, than a dead socialist. The Canadians come down to America to get medical care. Gee, I wonder why. Perhaps it's because they don't want to die while on waiting lists.
josh, Los Angeles, USA, CA
lol that'll keep the college educated in the country. The awesome thing about globalization is that people dont have to put up with this kind of BS anymore. The place you live in sucks? Move somewhere else.
Faye, USA,
£27k average graduate starting salary? Some mistake there I think. Perhaps this is based on City-only figures (typical!)
This report confirms what many twenty-somethings in semi-professional and professional capacities have been feeling for a while now: everything money-wise is stacked up against us! We have had to pay for our higher education and stretch ourselves vastly to buy a place to live (and we get pay the £125k stamp duty burden to rub salt into the wound!) Compare the finances of 30yr olds to the projected finances of current 25yr olds in 5 years time and you'll get the drift; the former is likely to have zero student loan repayments and 25%-of- take-home mortgage repayments instead of 50%-of- take-home. What happens to economies when you have such a disparity in the finances of generations?
Dan, Peterborough, England
There is no such thing as a free lunch! If you want all those government programs and benefits, you have to pay. If you want to change things, then vote with your feet, emigrate. Do not a solution from a politician. The only interest they represent is their own.
William, Paterson, NJ, USA
Glad to see that my choice to stay out of university is vindicated by the figures shown here. I'm now 23 and was among the first to study for the ill concieved AS/A2's, after receiving straight A's in my Gsce's i decided to leave education mid way through my "A-levels". I didn't like the rushed attitude to the courses and i couldn't help but think i was just being groomed for a similar experience at university. All i knew then was that I really did not want the crippling debt or the real uncertainty of post university life so i left my A-levels in my first year hoping to "work my way up". I'm just sad that I didn't get to follow my true passion at university as I was too concerned with how i would be able to pay off debts and live a decent life with no guarantee of a career at the end of my course. I can at least now look at my choice as being logical as I have no real monetary worries and I earn an above average salary. Just a shame others can't be as happy with where they are in life
Jamie dawes, Leicester, UK
I graduated with a Masters in Chemistry from St Andrews and know at least 3 people who have grad. starting salaries of £30,000 and I have an interview for a job offering £38,000. I have a larger student loan than most and do know IR and politics graduates who started at £21K. The degree done evidently affects the salary but I do also know someone who graduated with a BSc who is getting £17,000 a year and at least £4,000 of that disappears in tax/council tax and NI. There is something so definitely wrong here.
Rebecca Comley, Tunbridge Wells, Kent
I'm a graduate no way near earning £27k!!! would be nice though!!! the taxmen already takes half of my salary from me, i find myself calling up the tax office each month to check to see if my tax code is definately correct!!!!!
James, London, UK
I seriously doubt that an average starting salary for a graduate is £27k odd. Should really give references for these funny numbers.
Blooperman, London,
So after all that they are left with something approaching the mean wage in this country doesn't seem too bad a deal at 22yrs old. The starting salary quoted seems a little high and if JoBloggs is a graduate, why the hell is he using '2' in his comment! The starting salaries here at my company, a scientific one, is practically half of the one quoted in the article. gordon Brown is not the only one to have raided pension plans the companies themselves frequnetly did so in the nineties.Not to mention the investment funds who bought companies with the sole aim of getting their hands on the pensions.
John, London,
I'd like to meet all those graduates who manage to get a job at £27K! I'm 34, nearly qualified accountant and still only earning £27K.
I'm sure the picture is far worse for all those graduates who fall into the below average earnings, still owe £13K, have to live at home and basically spend the rest of their informative, career building years trying to keep the wolf from the door and delaying life plans.
I know someone who has left University, unable to secure a full-time job, works temping for the local council and is actively prevented from applying for a full-time job within the council because they are reserved for the full-time employees already there!! That, I think, tells you everything about the attitude of this government to offering opportunity to the upcoming generations!
Jonathan, Coventry, UK
24 year old graduate here who left for the US last year - the UK boomers are fine but everyone else is left out in the cold. High tax, ridiculous property prices, draconian curbs on civil liberties and not being able to go out for a(n expensive) pint without worrying about getting into a fight with some yob - no thanks.
Expat, Florida, USA
"Who are these new graduates earning ã27,155?"
I spotted that one too, I assume they work for quango's
Dominic, Manchester, UK
Move to Seattle.
Mr Wilson, Seattle, USA
Who are these new graduates earning £27,155?
Susan, Caton, Lancaster,
Russell - agreed.
Anyone who thinks that the brightest minds and hardest workers of this generation are going to work our socks off in order to support a burgeoning grey population is an absolute fool.
The society in which we live is increasingly restrictive on what one can do, what one can say, and how one can live. And yet simultaneously expects its citizens to pay more and more for less and less.
It's a joke, and having already spent time in Japan, I shall shortly be looking to the freer, cheaper, more fun locations of Hong Kong, Dubai or Sao Paulo.
I shall be taking my £80k a year (at 28) and Oxford education with me. Not without regret, of course. There are many things that I love about the UK. However, I feel that I would be stupid not to go. And that's a real shame. It's a shame that we are in a position where if you actually stay in this country as a young person, you are a moron, a mug.
Oh well...
Andrew, London, UK
its all a bit of an ugly circle, Government treats Graduates with valuable skills badly, resulting in the fact that they would prefer to find work in a more favourable desirable country, leading further to more imigrants taking the jobs of British graduates. Why would the average Joe Blogs Student want 2 stay in the UK? I feel the policies of Scotland should be widely followed and expanded upon, look after your own before you look after anyone else.
joe Bloggs, Belfast,
Given that people in there 50´s and above have been sold out by this government on their pensions I fail to see what other option there is but to tax those working more. For the majority of us in our 60's we prudently invested in what we were told to be a sensible pension arrangement to look after us in our old age. Similarly, those of us who weren't conned on the endowment policy scam engineered our mortgages to be fully paid up when we retired. 40 years ago we hoped that this foresight along with a meager state pension would allow us a reasonable quality of life when we retired. Then government screwed us all. Bad regulation allowed private pensions to go down the pan, Gordon Brown raided our pension pots for his social engineering programs and the state pension is an even worser joke than before. Now at age 60 we no longer have the luxury of time to try an redress this issue not of our making and refill our pension arrangements. Put simply you cant trust anyone these days !
Mike, Alicante, Spain
spot on. about time we had a report that higlights why people of my age (26) are looking to dubai and alternative european countries to live.
russell , solihill,