Baby boomers, born in the 20 years following the Second World War, have benefitted from higher earning potential, cheaper housing relative to income and major gains in living standards.
Willetts wrote: “For the past 30 years, Britain has enjoyed a time when our large baby boomer population were at their peak earning power. But we are now at a tipping point because the boomers are growing old.
“Politics is going to be very different as the baby boomers age. The age of tax cuts is over.”
The peer describes the UK Government’s attempts to address the imbalance as “clumsy”, adding that the responses have been “hysterical”.
“I know these taxes are unpopular. But the alternatives are far worse."
He highlighted the so-called mansion and dementia taxes.
The baby boomer admitted: “We are the first generation to have lived our entire lives under the modern welfare state. We have benefitted from Britain’s house price boom which has made home ownership unaffordable for our children.
“And we have done so well compared with the younger generation in so many ways that we cannot just turn to them to pay for our health and social care. And it is this cost above all which is pushing public spending inexorably upwards.”
Willetts said that the financial gap is “set to grow to the equivalent today of £20bn ($27.6bn, €22.4bn) a year, and then to £60bn after another decade”.
“This is equivalent to an income tax hike of 15p, the burden of which will overwhelmingly fall on the generations following baby boomers.”
For Willetts, one obvious source is capital or property taxes. “However, the bulk of our property tax revenues come through council tax – just about the most regressive property tax you could have.”
He added: “It is hard to tax wealth as wealth. But we can tax it as it moves in and out. And that leads us to another area where tax is poorly designed, widely abused and under-utilised – inheritance.
“I know these taxes are unpopular. But the alternatives are far worse. Our belief in universal healthcare, free at the point of use, is cherished even more than our opposition to tax rises.
“Unless we act, at some point we will face a choice between changing our approach to taxation, or cutting access to the NHS and letting the social care get into even deeper crisis. We can’t delay that debate for much longer.
“I believe the argument for a new approach to wealth taxation can be won. But it can only be won by an argument which appeals to both the interests of the boomers and also to their sense of obligation to others,” Willetts concluded.