Scrap national insurance for all young people

Says new TPA research

New TaxPayers’ Alliance policy paper says that we shouldn’t give hand-outs to students and graduates, we should help all young people by taking less of their money.

The chancellor is reported to be examining ways to tackle ‘intergenerational unfairness’ at next month’s budget – cutting their taxes is the best way to do that.

Labour has called for an abolition of tuition fees but doing so – or making student loan repayment terms even more generous – would be unfair to those who don’t go to university.

Rather than (yet again) cutting pension tax relief for older workers to pay for a tax cut for the young, the government should instead cancel its proposed changes to student loan repayments, which only benefit fewer than half of young people.

The TaxPayers’ Alliance is today calling on the government to give all young people a break by scrapping their employees’ national insurance contributions. The campaign group has published a policy paper, Young people and national insurance, outlining three options for cutting national insurance contributions:

• Raise the starting age on employee national insurance from 16 to 26 instead of the government’s plan to raise the student loan repayment threshold from £21,000 to £25,000. Nobody aged 25 or under would pay any employee national insurance. The government’s plan raises spending by £2.3 billion, ours cuts tax by £2.6 billion
• Raise the starting age on employee national insurance from 16 to 30, cut the student loan repayment threshold from £21,000 to £12,500 and raise the repayment rate from 9 to 15 per cent. Most graduates would repay their loans and no under 30s would pay any employee national insurance. Do this instead of the government’s plan to raise the student loan repayment threshold from £21,000 to £25,000. The government’s plan raises spending by £2.3 billion, ours cuts spending by £4.4 billion and cuts tax by £7.2 billion
• Raise the starting age on employee national insurance from 16 to 32 instead of Labour’s plan to abolish tuition fees. No taxpayer under 32 would pay any employee national insurance. Labour’s plan raises spending by around £9.5 billion, ours cuts tax by £10.2 billion

The striking swing in support among younger people towards Labour at the election in June was partly due to their policy platform of abolishing tuition fees. It was also a reaction to Conservative policy since 2010, particularly on tuition fees, rent controls and Brexit (support for leaving the EU is strongly correlated with age). Since the election, the government is reported to be seeking ways to help young people struggling with the cost of living.

Both parties have rightly identified that intergenerational unfairness is a real issue that needs to be addressed. But it should be corrected in the right way – by cutting taxes and leaving more money in the pockets of those who earned it.