Opinion: The Tax on the Youth Is Self-Inflicted
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A few weeks ago, the Conservative government announced its plan to “fix” social care and rammed it through parliament without national debate or consideration. Leaving aside the gross inadequacies of the plan to solve problems facing the care sector, the proposals on how to fund it were abhorrent. It was another tax on working families to support the prosperous elderly.
The government plan promised to increase National Insurance (NI) contributions by around 10%, in order to raise an additional £12 billion of revenue. This, they said, would go towards fixing the crisis in social care. National Insurance is a tax which enables qualification for state benefits and the state pension. NI is paid by employees, the self-employed and employers once they surpass a certain earning threshold. Without a full NI record, a person “may not be able to claim some benefits and may get less than the full state pension, currently £179.60 a week.”
Out of all the major taxes that could be levied to raise the necessary revenue, NI is the most regressive. The burden falls on those who work, whereas the retired and those who earn passive income — such as from rent or dividends — need not pay a penny. Yet excessive wealth in Britain is hoarded by precisely that group, whereas people afflicted by in-work poverty who struggle to put food on the table are having their pay cheques cut. Sir Ed Davey has criticised the government, saying that “Boris Johnson gave voters a cast-iron guarantee that he would not raise National Insurance – and now he’s breaking voters’ trust again.” Davey, a long-time campaigner for carers, as well as a family carer himself, added that “the Government’s plans won’t fix the social care crisis”.
The tax rise was justified by the government as a way of stopping care requirers from having to sell their own homes to pay for the service. However, this comes at the expense of the young family who need every penny they earn to even consider putting down a deposit for a house. Taking money away from the working age population is not only bad ethics but also bad policy: economic growth will be driven by consumer spending, so raising taxes on money that would otherwise be spent will stifle the recovery.
Unfortunately, this is not the only tax rise on young people that this government is introducing. At the last budget, Rishi Sunak announced he was freezing income tax thresholds and thereby creating a significant tax rise on working people, as a fiscal drag pushes employees into paying higher rates of income tax on the same salary. Then, there is the latest government announcement, which is to lower the threshold at which graduates repay their student loans. Currently, 9% of every penny that graduates earn above £27,295 is diverted into paying back their student loan. The new government plan is to cut that threshold down to £23,000, which will mean that someone on a salary of £30,000 will have to pay back an extra £400 a year (according to the Institute of Financial Studies). Over a lifetime, this constitutes a tax rise of many thousands of pounds.
This is not the only raid the treasury is conducting on the wallets of the impoverished youth. The £20-a-week cut to Universal Credit currently being imposed by the government will affect 5.9 million people, 40% of whom are already in work. It is the single largest ‘overnight cut’ to state support in the history of the British welfare state and will have the same disastrous effects on the economy as the NI hike. Numerous senior political figures have urged the government to reconsider the cut, with Ed Miliband arguing that the “energy price rises turn the indefensible decision on Universal Credit into an unconscionable one”.
These tax rises on workers will have horrific social effects akin to the austerity measures of the past decade. People will be disincentivised to seek work as it becomes increasingly less worthwhile. The outcome will be increases in long-term unemployment, crime rates, poverty, and homelessness. The enormous state spending of the past eighteen months has pushed the national debt to new heights and there is general consensus that the treasury will require new revenues to reduce the deficit to a sustainable level once again. However, those tax rises do not need to hit the working population. The economy has transformed, and public taxation needs to change with it. Taxes on digital services, on carbon and on extreme wealth is where the future lies — not on innocent families trying to improve their lot.
Never in the history of British politics has there been such a blatant attack on young working people to the benefit of the affluent elderly. Why is this the case when, in 2016, 63.1% of the country was of working age, while over-65s made up just 18% of the population? Surely, the Conservative Party are therefore running an enormous electoral risk? However, the truth is that they are not. In fact, it is precisely electoral politics which is to blame for the government’s decision to make young people the first victims of any policy.
The Tories don’t mind hammering young people, not because they believe the young will never vote Conservative but because they know that the young will never vote full stop. Turnout at the last General Election amongst the over-65s stood at an estimated 74%, whereas for those aged under 25 it was a mere 47%. The numbers aren’t considerably better for the 25 to 34-year-olds or the 35 to 44-year-olds, whose turnout stood at 55% and 54% respectively.
Why should any party bother appealing to a demographic that constitutes such a small percentage of the overall vote share? This war on the youth is entirely self-inflicted. Thankfully, it is a war where the strategy for victory is a simple one: get out the vote. Mobilising working age people to register to vote and take the time on polling day to stand up for their interests by ticking a box will ensure an equitable approach to public finances.
An equitable approach has never been needed more: stagnant wages, the largest inflationary increase on record and a cost-of-living crisis spiralling out of control. Pensioners will be protected by the generous ‘triple lock’ while, following the cut to Universal Credit, it is estimated that poverty will afflict one in three children. Former Prime Minister and Chancellor of the Exchequer Gordon Brown has summed up the situation in Britain today: “Twenty years ago we promised we would abolish child poverty in a generation. Now all we can do is offer charity to prevent destitution.”