Pensioners should share the pain of austerity cuts and pay more tax to promote fairness between the generations in the housing market, a think-tank has warned.

The Fabian Society claims high levels of home ownership among older people threatens fairness, as the wages of middle-income workers stagnate and they cannot afford to buy a home.

It argues pensioners' taxes should increase, their benefits should be cut, and a tax on property wealth should be introduced.

Loading article content

The report follows previous warnings that the range of universal benefits for pensioners in Scotland such as free care and bus travel may lead to conflict between the generations.

It also comes weeks after Welfare Secretary Iain Duncan Smith failed to rule out future cuts to benefits such as Winter Fuel Allowance for well-off pensioners, while Business Secretary Vince Cable has also said it was "barmy" to continue paying benefits to wealthy pensioners.

Meanwhile, a report by the Joseph Rowntree Foundation said the council-tax freeze and universal free services have not helped poorer households and may have made the impact of austerity cuts worse.

It said the impact of cuts on the vulnerable was not being properly addressed by councils, while the Scottish Government was subsidising wealthier families.

According to the Fabian Society, more than three-quarters (76%) of pensioners now own homes, compared with just over half (58%) 20 years ago, while in the past decade there has been a "dramatic fall" in home ownership among under-45s.

In 1979, the year Margaret Thatcher came to power, middle-income working-age households enjoyed an income 93% above that of middle-income retired households. That figure is now 37%, the study showed.

The society said this had profound implications and there should be a presumption of equality as "old age is no longer a proxy for poverty". It says the key policy should be to raise £7.2 billion by hiking taxes on pensioners so the 27% they pay as a portion of their gross income would rise to 33%.

That would put their tax in line with that of working-age households with the same income.

It said the project should be long-term, to avoid a sharp drop in living standards, but said for now the Government should consider measures such as taxing private pension lump sums to help fund universal care services.

It said: "In public policy and deficit-reduction measures, ministers should adopt a presumption of equality across age groups.

"In financial terms alone, older people are no longer distinct and blanket policies favouring them should be reviewed."

But Age Scotland said the vast majority of pensioners north of the Border were not rich, with more than 100,000 living in poverty.

Spokesman Lindsay Scott said: "Pensioners have had to scrimp and save for their homes and basically what someone from the south-east of England is saying in this report is saying is 'flog them'.

"Treating pensioners as an amorphous group of relatively wealthy people who should make way for up-and-coming generations is a bit rich.

"Where are they going to go? Where are the small houses for them?"

The Fabian Society said specific universal benefits, such as the winter fuel allowance, which contributes 3% to middle-earning pensioners' incomes, could be

reassessed without threatening the wider principle of universalism.

The Government should also scrap its "triple lock", which keeps pensions rising in line with the highest measure of inflation, as when working-age incomes are falling it "creates intergenerational unfairness".

The age of 80 is an "appropriate starting point" for age-specific benefits if the policy is aimed at supporting those on low incomes or older people with high social or health needs, the think-tank said.

"The adverse impact of either approach on retired households in the middle could be justified by the need to 'share the pain'," the society said.

As well as cutting benefits or raising taxes, the society backed Labour calls for a tax on property wealth, saying it could be done through council tax reform.

Grant Costello, chairman of the Scottish Youth Parliament, said he remained supportive of universal benefits.

He added: "It is wrong to shift the burden on to one group, regardless of the generation. Elderly people are no more advantaged or disadvantaged a group than any other."