This article originally appeared in our Elevenses newsletter.
Good morning. The government wants to lower the earnings threshold at which graduates start repaying their student loans. As it stands, grads begin repayments when their salary hits £27,295. But in a bid to save some cash that watermark could be lowered to £23,000, saving the Treasury close to £2 billion a year.
Graduates themselves – who, it might shock the government to hear, are actual people and not just a column on a spreadsheet – would not be so lucky. When this month’s hike in National Insurance contributions is factored in, the Financial Times reckons a grad earning the current threshold will have their take-home pay slashed by more than £800 annually. Lowering the threshold to £23,000 would mean millions of new and existing graduates face an effective 50 per cent levy on additional earnings in some of the lowest salary bands. The Institute for Public Policy Research said the government’s plans are “virtually indistinguishable from a tax rise targeted at young workers alone”. So much for the self-proclaimed “party of low taxation”.
Here are some other statistics. In the decade after the financial crisis, the UK had the weakest wage growth of any G7 country and the third-weakest across all 34 OECD countries. Average wages in this country contracted at an average rate of 0.3 per cent between 2008 and 2018; in Germany and France they grew by 1 per cent and 1.2 per cent respectively. What about house prices? They’re now 30 per cent higher than their pre-crisis peak. Forecasters believe they are set to rise by up to 3.5 per cent a year between 2022 and 2024. As for the rental market, prices have risen by 10.9 per cent since 2015, according to the Office for National Statistics.
Young people might be forgiven for looking at these numbers and thinking: there is nothing for us here. In England, students leave university with an average debt burden of £45,000. They’re entering a labour market in which wage growth is so stagnant as to be non-existent – and what little money they do earn is then taxed to balance the books of a government they overwhelmingly did not vote for. If you live and work in London, you’ll spend close to half of what’s left of your pay packet on rent. The prospect of securing a foothold on the housing ladder is so far-fetched as to be fantastical. The degree you did is “soft”, the things you care about are “woke”.
The government, whenever it sets its mind to fixing its finances, seems to settle on young people as its cash cow. It makes sense, I suppose. Boris Johnson earned just 22 per cent of the under-30s vote in 2019 – he has little incentive to cater to young people. But beyond political expediency, this latest policy smacks of a fundamental lack of understanding of the lived-realities of people who went to university after 2012, when David Cameron and Nick Clegg took it upon themselves to treble tuition fees.
Under-30s now face a debt and taxation burden unlike anything endured by the people making the decisions. That is a direct consequence of the utter lack of political representation for young people in Westminster. With both parties chasing the same mythical band of middle-aged, middle-class, home-owning voters, that’s unlikely to change anytime soon. And until it does, young people will continue to shoulder a disproportionate burden.
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