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2 October 2021

Rishi Sunak’s Treasury has declared war on the young

From student loans to National Insurance rises, the current government's attitude is to tax the young and poor to coddle the old and rich.

By Jonn Elledge

“We need to have a conversation,” I wrote in this space last February, “about how the old and rich can compensate the young and poor for their sacrifice.” In June, the New Statesman’s deputy online editor Rachel Cunliffe noted that “sacrifices have been made by the young in the form of lost earnings and reduced freedoms, for the sake of the vulnerable old”, and that at some point it might seem kind of, y’know, fair to compensate them for that. As early as March 2020, Camilla Cavendish was arguing in the Financial Times that “We are prioritising the old and will have to make it up to the young”. Ten months later, Ruth Davidson – an actual, real life, senior Tory, albeit not a Westminster one – wrote in the Telegraph that “We have to repay the young for their enormous Covid sacrifices”.

But our government, in its infinite wisdom, has decided to go another way. Wouldn’t it actually be fairer, it took a break from its busy schedule of stoking culture wars and breaking Britain’s supply chains to wonder, if the young were to somehow compensate the old for all the inconvenience and cost of the pandemic?

The government is so into this idea, indeed, it’s decided to do it twice, which is two more ideas than it’s had to fix the petrol crisis. First came the plan for the new health and social care tax, which will start in April 2022 as a 1.25 percentage point rise in National Insurance, charged on both employers and workers, before being rolled out to become its own thing the following year. (Because obviously what we really need in this country is a third income tax.)

This is a stupid policy in a whole panoply of ways. It takes more money out of people’s pockets, even though wages had barely risen for a decade, even before the whole global pandemic thing kicked in. It means taxing employment, and thus risks putting employers off hiring.

And it means raising the taxes on younger people, who are more likely to be struggling and less likely to own houses, while letting asset-rich and comfortable older ones – that is, those for whose social care this reform is intended to pay – off scot free. It means northern workers paying more tax so that the retired owners of million pound houses in the south don’t have to. The social care funding crisis is real and huge and needs to be addressed, but this is a quite appallingly unfair way of going about. No matter: it’s happening anyway.

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Not content with having raided the wallets of the young once, however, Rishi Sunak’s Treasury is debating going back for seconds. On Monday 27 September, the Financial Times reported that the government “plans to lower the salary level at which graduates start repaying loans”, from £27,295 to around £23,000 a year. This nice little earner would save the Treasury around £2bn a year.

But, in the words of IPPR economist Henry Parkes, it will be “virtually indistinguishable from a tax rise targeted at young workers alone”. It will be paid only by those who started their degree after 2012 – almost all of whom are under 30, a group whose wages are likely to be lowest. Since loan repayments function like a graduate tax, those guys were already paying marginal tax rates of well over 40 per cent on relatively modest wages. Now, the government has decided they should pay even more. Renters, notes Rachel Cunliffe, will be paying higher tax rates than their landlords.

Oh, and the best bit is, it would mean the government was retrospectively and unilaterally changing the terms of a contract, and there is literally nothing anyone can do to stop them. Good game!

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The young, remember, have given up rather a lot through this pandemic. It’s all very well staying at home for months on end when it’s your own home and it comes with a garden: it’s a quite different prospect when it’s a cramped room in a flat shared with strangers. When you’re older, what’s more, one year can be very like another, and losing one is not that big a deal. But a year lost from education or in the earliest part of your career means a year of things not learned, friendships not made, experiences not had, lovers never met. In the darker moments of this crisis I have comforted myself with the thought: “Well, at least this didn’t happen when I was 20.”

Yet the young have given up all those things, to help prevent the spread of a virus that is vastly more dangerous to the old. Doing so was an act of solidarity, because protecting others was the right thing to do.

And how are we repaying them? By compounding an economy and a housing market already rigged against them with a tax system rigged against them, too. By taking ever more money out of their pockets, without asking those who sit on massive unearned personal housing wealth to contribute another penny.

And why are we doing this quite obviously unjust thing? Because the old vote Tory, and the young do not.

Perhaps this decision to systematically shaft an entire generation will one day come back to haunt the party. But by then, I fear, it’ll be far too late.

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