Executive Summary
Every government has more spending commitments than it can fund in a bad year. Deciding what gets protected and what gets cut is the most important political decision a government makes. In the UK, that decision is made implicitly, through political inertia, electoral arithmetic and the contractual force of government debt, not through any open democratic process.
The result is a spending hierarchy that consistently protects the commitments of the most politically powerful and exposes the commitments most needed by the least powerful. Debt interest sits at the top by contract. The state pension sits near the top because of electoral arithmetic. NHS emergency care follows because the public expects it. Everything else, including housing, education, criminal justice, working-age welfare and children, is up for negotiation when money is tight.
This document argues three things:
- Making the unwritten hierarchy explicit is itself a democratic act. You can't debate what you can't see.
- Once exposed, the current hierarchy shows a consistent bias: towards current voters over future ones, towards people receiving transfers over people producing revenue, and towards managing crises over preventing them.
- A hierarchy that ranks spending by a stated theory of social obligation, rather than by electoral power, would look very different, and building one should be a formal part of how the country is governed.
It also raises a question that runs through every other pillar of the Generational Reset. If the tax base weakens, through stagnant wages, automation, demographic change or a weak economy, which obligations does the state honour first, and who decided?
Key Proposals
Establish a statutory Fiscal Obligations Framework. A published, periodically revised ranking of the state's spending obligations, debated each parliament and independently monitored by the OBR — making the implicit hierarchy explicit and accountable.
Introduce a statutory child poverty floor as a Tier Two obligation. A legal commitment that no child falls below a defined income threshold, with binding trajectories reported annually to Parliament.
Make the revenue dependency of pay-as-you-go transfers explicit. A mandatory section in the OBR's Fiscal Sustainability Report modelling the hierarchy's resilience under wage stagnation, unemployment, and demographic shocks.
Commission a Citizen's Assembly on Fiscal Priorities. A structured democratic deliberation producing a recommended spending hierarchy — the first explicit democratic answer to a question the UK has never formally asked.
Build a public fiscal prioritisation tool. Letting citizens set their own spending hierarchy under a realistic budget constraint and compare it to the current implicit one, with results published openly.
1. The Unwritten Hierarchy: What It Is
The UK has no statutory fiscal hierarchy. In theory Parliament can grant or withdraw any spending in any year. In practice, three forces set the order: contracts, political protection and institutional inertia.
1.1 Tier One: Contractual Obligations
Interest on government debt is the first practical charge on public revenue. Parliament has never voted to put it first. It comes first because defaulting would wreck the UK's credit rating, raise borrowing costs across the public sector and set off financial consequences that would make every other commitment harder to meet. That follows from being a heavily indebted state that borrows in international markets. It isn't a political choice.
Debt interest was £106 billion in 2024-25, close to the entire £119 billion education budget.1 It buys nothing. It is the cost of past spending decisions, compounded over time, and every pound spent on it is a pound unavailable for anything else. The direction matters too: the OBR projects debt interest rising as a share of GDP if the government keeps running deficits before interest.2
1.2 Tier Two: Politically Untouchable Transfers
The state pension sits here, not because of any legal protection, but because of the electoral arithmetic of British democracy. At the 2024 general election an estimated 73% of over-65s voted, against 37% of 18 to 24-year-olds and 41% of 25 to 34-year-olds.3 People aged 60 and over hold 49% of UK household wealth, up from 39% in 2008.4 Pensioners are also the largest bloc of reliable voters under first-past-the-post. No party that alienates them can expect to form a government under the current system.
As a result, the state pension, the UK's largest single spending commitment at £146.5 billion a year, is in effect protected from serious reform by electoral self-interest rather than by any principled view of what the state owes. The OBR projects it rising from about 5% of GDP today to around 9% by 2075-76, with the triple lock accounting for around a third of that rise.5 The triple lock, which raises the pension every year by the highest of earnings growth, inflation or 2.5%, whatever the state of the public finances,6 was introduced by the 2010 coalition as an offer to a high-turnout group. The OBR has since found it cost around three times what was first expected.5 That protection was first breached in September 2026, when the government proposed an adjusted triple lock from April 2030, confirmed in the October 2026 Budget. Even then, the pension will still rise by at least inflation or 2.5% every year, whatever the state of the public finances, so the change slows its growth relative to earnings without moving it down the hierarchy (see Welfare).7
At the 2024 election about 73% of over-65s voted, against around 40% of under-35s.3 People aged 60 and over hold 49% of UK household wealth, up from 39% in 2008.4 The state pension costs £146.5bn a year, is projected to rise from about 5% to around 9% of GDP by 2075-76,5 and is raised every year by the triple lock whatever the fiscal position.6 UK child poverty stands at 27%, with no equivalent statutory protection.
One commitment rises automatically and is almost immune politically. It is held by the group that votes most reliably and already owns half the wealth. Meanwhile a commitment to children, who can't vote at all, stays fully open to cuts. This project's own connecting argument, which no single source makes on its own, is that the hierarchy tracks voting power rather than need. If it tracked need, the order would look nothing like this.
The causation above is consistent with more than one response. One is to leave the hierarchy as it is, on the stability grounds set out in the Steel Man: pensioners planned their lives around a reasonable expectation, and disrupting that after the fact is unfair. A second is a narrower fix to the instrument rather than the hierarchy, such as the Welfare pillar's proposal to replace the triple lock with a smoothed earnings link while leaving the pension's place in the order unchanged. A third is this pillar's alternative, which moves the state pension down to an earnings-linked, conditional Tier Six, below children, NHS care, working-age welfare and education, rather than only changing how it is uprated.
Choosing to move the state pension's position, not just its uprating formula, is a value judgement, and this pillar states it as one. The judgement is that any claim on the state's revenue should be justified by a theory of social obligation, not kept in place because of who already holds political power, even though that makes a real, good-faith stability argument harder to honour in the short run. A reader who gives more weight to the expectations pensioners built their retirement around than to correcting the hierarchy's bias towards power is not wrong on the evidence. They are weighing the same facts differently: how much a past political promise is owed, set against a pressing need that currently has no protection.
Establish a statutory Fiscal Obligations Framework that removes the state pension's automatic top-tier status and ranks it as an earnings-linked, conditional obligation below a new statutory child poverty floor, NHS care, working-age welfare and education, debated each parliament and monitored independently by the OBR. The falsification test below sets out what would show this re-ranking is correcting the bias it targets rather than just relabelling it.
1.3 Tier Three: Commitments the Public Expects
NHS emergency care sits here. No government could let people die in hospital corridors for lack of funding without paying a political price. The NHS has no legal status as a first charge on revenue. It is protected by the certainty that withdrawing emergency care would be an immediate political disaster. That is strong protection, but it differs from the protection debt interest has (a contract) and the protection the state pension has (votes).
In practice, NHS funding is squeezed at the edges, through waiting lists, gaps in social care, under-investment in buildings and equipment, and staff shortages, but never cut to the bone. People experience the squeeze as worse service rather than open rationing, which is easier for governments to survive than explicit cuts.
1.4 Tier Four: Everything Else, the Contestable Zone
Below these three tiers is everything else: housing, education, criminal justice, working-age welfare, children's services, public health, local government, infrastructure, defence beyond treaty minimums, and the parts of the state that prevent future crises rather than manage current ones.
This is the tier where spending reviews happen and "difficult choices" are made. It holds the spending most needed by the least powerful: children who can't vote, working-age people on low incomes who vote least reliably, and future generations who have no vote at all. It also holds the spending most likely to save money later by preventing problems now.
2. The Revenue Dependency Problem
The hierarchy matters most when the tax base weakens. The commitments at the top don't depend on revenue: debt interest is contractual, and the triple lock is automatic. When tax receipts fall, those commitments don't shrink, so the whole adjustment falls on the contestable tier.
2.1 What Weakens the Tax Base
The UK tax base depends mainly on how many people are in work, what they are paid and how productive they are. All three are under pressure.
Stagnant wages. UK real wage growth has been among the weakest in the G7 since 2008.8 Flat wages mean income tax and National Insurance receipts grow slowly relative to GDP, so the tax base grows more slowly than the commitments it has to fund.
Automation and a changing labour market. The shift towards platform work, gig jobs and automation reduces National Insurance receipts, because the self-employed pay less National Insurance and platforms often misclassify workers as self-employed. Over time it may also shrink the employment base that pays for pay-as-you-go transfers.
Demographic change. The dependency ratio, the number of workers for each pensioner, is falling, and the OBR projects it will keep falling for decades. The pay-as-you-go state pension is a direct claim on this shrinking working base. The Demographics pillar sets out the full picture.
A weak economy. The Economy pillar's central argument is that the UK is set up to earn financial returns on existing capital rather than to invest in new enterprise. An economy that produces returns to capital rather than wages produces a narrower base for income tax and National Insurance.
2.2 What Happens When the Base Weakens
When tax receipts fall short of committed spending, the hierarchy decides who bears the cost. Under the current unwritten hierarchy:
- Debt interest is paid first, with no room for negotiation.
- The state pension is paid in full, because political consensus makes cuts almost impossible.
- NHS emergency care is maintained, because public expectation makes it politically untouchable.
- The contestable tier absorbs the whole adjustment.
So the tier that holds the spending most likely to prevent future crises, most needed by the least powerful and most likely to build future economic capacity is the shock absorber for the whole system. That isn't a rational fiscal design. It is prevention being steadily defunded to protect transfers.
2.3 The Ranking Question
This analysis raises a question British public life almost never asks directly: if you could set the hierarchy openly and democratically, what would it look like?
There is no single correct answer. People with different values and at different stages of life will rank spending differently, and that is the point. The current hierarchy wasn't chosen through democratic debate. It was imposed by the interaction of financial markets, electoral arithmetic and institutional inertia. A democratic alternative would make the choices explicit, debate them openly and revisit them as circumstances change.
The table below sets the current unwritten hierarchy alongside an alternative built on stated principles. It is offered as a starting point for structured debate, not a final answer.
The "current" column is deliberately less detailed than the alternative from rank 4 down. Section 1 shows that today's system has only three tiers with any real protection: debt interest, the state pension and NHS emergency care. Everything else, including working-age welfare and education, sits together in one undifferentiated Tier Four with no internal order, and the table doesn't pretend otherwise. The point of the alternative is to break that single tier into explicit ranks, each with its own justification, and to give the state pension itself an explicit, conditional rank for the first time instead of the automatic top-tier protection it has today.
View underlying data as a table
| Rank | Current implicit hierarchy | Principled alternative | Basis for change |
|---|---|---|---|
| 1 | Sovereign debt interest | Sovereign debt interest | Contractual, so unchanged. Default would destroy everything else. |
| 2 | State pension (triple lock) | Children out of poverty: statutory floor | Children have no vote and no voice. Poverty in childhood is the most expensive long-run failure. |
| 3 | NHS emergency care | NHS emergency and preventive care | Prevention saves more per pound than managing crises. |
| 4 | Tier Four: undifferentiated | Working-age welfare floor, earnings-linked | People can't contribute to the tax base if they can't meet basic needs. |
| 5 | Tier Four: undifferentiated | Education: early years and compulsory | Investment in people's skills is the highest-return public spending. |
| 6 | Tier Four: undifferentiated | State pension: earnings-linked flat rate | A legitimate claim, but it shouldn't be immune to fiscal conditions or rise faster than the wages that fund it, and it is no longer automatically ranked above them. |
| 7 | Tier Four: undifferentiated | Everything else | Contestable, as now, but a true residual category rather than a catch-all for everything the top three don't cover. |
3. The Legitimacy Problem
The deeper question isn't only whether the current hierarchy is fair. It is whether a hierarchy that decides who gets paid when money is short can be legitimate if nobody ever chose it.
3.1 The Democratic Deficit
No parliament has ever voted on the UK's spending hierarchy as a whole. Spending decisions are made each year in the Budget. Entitlements are legislated separately over decades. The way they interact, the hierarchy that emerges when they compete for a limited tax base, is never debated as one question.
That matters because the hierarchy is the most important fiscal decision a state makes. It decides whose needs are treated as obligations and whose as aspirations, and whose plans are secure and whose depend on the politics of the day. Over time it decides what kind of society the UK is: not what politicians say it values, but what it protects when choices are hard.
3.2 Contracts and Democratic Choice
One objection to making the hierarchy explicit is that some parts are contractual rather than political. Debt interest can't be changed without default. That is true. But it doesn't follow that the hierarchy as a whole is beyond democratic influence. The level of debt behind the interest bill was a political choice. Elected governments made the spending decisions that created the debt. The contractual obligation at the top of the hierarchy is the result of earlier political choices that could have gone differently.
3.3 The Question of Fairness Between Generations
The current hierarchy consistently favours today's voters over tomorrow's. Pensioners, who vote most reliably, sit near the top. Children, who can't vote, sit near the bottom. Future generations, who have no vote at all, will bear the long-run cost of a debt interest bill that already rivals the education budget.
This can't last indefinitely. As the age balance of the electorate shifts, slowly but irreversibly, the electoral arithmetic that protects the current hierarchy will change too. The question is whether that change comes through managed democratic debate or through fiscal crisis. A crisis would be far more damaging.
4. Public Engagement
This topic suits structured public engagement better than most policy questions. What does the state owe, to whom, and in what order? Every citizen has a stake in that question and an implicit view on it.
A well-designed public prioritisation exercise would:
- set a fixed budget that reflects real fiscal conditions;
- make participants trade off explicitly, so that protecting one commitment means cutting another;
- show the gap between stated values ("children matter") and revealed preferences (what people protect when forced to choose);
- break the results down by age, region, income and other characteristics;
- produce data on what the public values under real constraints, which tells us far more than polling about abstract priorities.
The Generational Reset website specification (S6_01) allows for interactive tools. The fiscal hierarchy exercise is a strong candidate to be the most engaging of them, because the user is making a decision, not reading a policy document. The combined results of many such decisions would be a form of democratic evidence that the current political system doesn't produce.
5. Counter-Arguments
'The state pension is an earned entitlement and must be protected'
The state pension is a legitimate expectation, but not an earned entitlement in the financial sense. As S1_08 explains, there is no investment fund behind it and no accumulated assets. It is a political commitment, made by successive governments to current pensioners and paid for by current workers. That commitment is real and should be honoured. But "honour the commitment" and "make it immune to democratic revision" are different things. Honouring it means paying it. It doesn't mean making it the automatic first charge on a tax base that may not grow fast enough to sustain it forever at current uprating rates.
'You can't rank social obligations: all needs are legitimate'
All needs are legitimate. The question isn't whether they are legitimate but in what order they are met when there isn't enough money to meet them all at once, which is always. The current hierarchy answers that question implicitly. This document argues it should be answered explicitly. Refusing to rank is not neutral. It defends the current ranking by declining to examine it.
'This would create instability, because people plan their lives around entitlements'
Correct, and this is taken seriously. The Steel Man in Section 2.3 addresses it directly. The argument is not for retrospective changes to existing entitlements but for a transparent framework for future ones, with long transition periods, full parliamentary debate and independent monitoring. The instability objection also proves too much. If it were accepted, no spending hierarchy could ever be democratically revised, which would itself be a democratic failure.
'Putting children ahead of pensioners is just politics in the opposite direction'
The alternative proposed here is not the current hierarchy turned upside down. It rests on a theory of social obligation: the state's first duty is to make sure nobody is shut out of the chance to flourish by circumstances entirely beyond their control. Children in poverty didn't choose their circumstances. The case for putting them first is not a preference for one age group over another. It applies one consistent principle: prevention before management, investment before transfer, and future capacity before current consumption.
Cross-Pillar Dependencies
| Pillar | Dependency |
|---|---|
| S1_08 State Pension Explained | The state pension's place in the hierarchy is the hierarchy argument applied to the UK's largest spending commitment. S1_08 explains how the pension works; this document explains why that spending is so hard to reform. |
| S1_03 Welfare | The welfare system's tilt towards pensioners over children and working-age people on low incomes is the hierarchy in action. The triple lock as top-tier spending and the two-child limit as contestable spending were not separate decisions. They were the same decision about what the state owes to whom. This pillar's Tier Six re-ranking (§1.2) is a different and deeper fix than the Welfare pillar's proposal, which keeps the pension's place in the order and changes only how it is uprated. Neither answer is treated as more authoritative than the other; both stand as live, unreconciled positions. |
| S3_01 / S3_02 Tax | Judging whether the hierarchy is sustainable means understanding the tax base that funds it. The case for merging National Insurance into income tax, and for taxing income from wealth more fully, is partly a case for strengthening the revenue side of the hierarchy. |
| S3_03 Economy | Stagnant wages are the main way the tax base weakens over time. The Economy pillar's analysis of UK productivity and wage growth is the revenue-side input to any assessment of the hierarchy's sustainability. |
| S2_01 Political Reform | The hierarchy can't be made democratic without an electoral system that turns everyone's preferences into political outcomes. Under first-past-the-post with low youth turnout, it will keep reflecting the preferences of high-turnout groups. Proportional representation and votes at 16 change the inputs. |
| S1_07 Public Debt | Debt interest, tier one of the hierarchy, depends directly on the size of the public debt. The Public Debt pillar's analysis of deficits and fiscal rules explains how debt interest's share of the hierarchy grows or shrinks over time. |
| S4_05 Demographics | The falling ratio of workers to pensioners is the main pressure on the pay-as-you-go part of the hierarchy. The Demographics pillar sets out the trajectory against which every projection here should be read. |
| S1_02 Education | Education, especially in the early years, is one of the highest-return investments the state can make. Its place in the contestable tier, below the state pension, is one of the clearest mismatches between the current hierarchy and any principled view of social return. |
7. Proposals for Change
The following proposals are put forward for public discussion and challenge. They are not a programme for government.
Establish a statutory Fiscal Obligations Framework: a published, regularly revised ranking of the state's spending obligations, debated in full by Parliament at the start of each parliament, updated at each Spending Review and monitored independently by the OBR. The framework would not bind annual Budgets, but it would make the unwritten hierarchy explicit and make governments accountable for departing from it.
Introduce a statutory child poverty floor as a Tier Two obligation: a legal commitment that no child will fall below a defined income threshold, with binding targets monitored independently and reported to Parliament every year. This moves the most economically productive long-run investment out of the contestable tier and into a protected one.
Make the dependence of pay-as-you-go transfers on tax revenue explicit in all fiscal documents. The OBR's Fiscal Sustainability Report should include a mandatory section testing the hierarchy under stagnant wages, rising unemployment and demographic decline, and saying explicitly which tier absorbs each shock.
Commission a Citizens' Assembly on Fiscal Priorities: a structured democratic deliberation, with members chosen at random and balanced by age, region and income, asked to produce a recommended spending hierarchy for Parliament to consider. Its recommendations would not be binding, but it would be the first explicit democratic deliberation on a question the UK has never formally asked.
Build a public fiscal prioritisation tool on the Generational Reset website, letting people set their own spending hierarchy within a realistic budget, see the combined results across all users, and compare their priorities with the current unwritten hierarchy. The data would be published openly as evidence of what people choose when they face real trade-offs.
The Generational Reset is a non-partisan, public-interest project. It is not affiliated with any political party, does not accept corporate funding, and publishes all its work under open licence.
Sources: OBR Fiscal Risks and Sustainability 2024 and 2025; OBR Economic and Fiscal Outlook November 2025; IFS Green Budget 2024; Resolution Foundation Intergenerational Audit 2024; ONS Public Sector Finances 20269; DWP Benefit Expenditure and Caseload Tables 2024/2510; IFS Triple Lock Analysis 2025; OECD Pensions at a Glance 202311.
The Generational Reset | S1_09: The Fiscal Hierarchy | For public discussion. Not affiliated with any political party. | generationalreset.org