Kemi Badenoch’s plan to halve National Insurance for 21-24 year olds aims to tackle rising youth unemployment and boost lifetime earnings.
Kemi Badenoch’s plan for youth jobs
Kemi Badenoch, the Conservative leader, has unveiled a proposal to reduce employer National Insurance contributions for young people. This initiative specifically targets individuals aged 21 to 24 years old, aiming to get them into work.
The plan involves halving the current 15% employer National Insurance rate to 7.5% for this specific age group. It is presented as a crucial “rescue plan” designed to address the nation’s soaring youth unemployment figures.
The Conservative party states this significant move will save businesses an average of GBP1,545 for every young worker they employ. This includes specific, calculated savings for those earning the National Living Wage and for higher earners above GBP30,000.
The party estimates the initial cost of this measure at GBP3.2 billion. However, they project this figure will decrease to GBP2.3 billion due to anticipated reductions in benefit payouts and an increase in tax revenues.
Youth employment figures and proposed savings
The proposal outlines specific financial details and highlights concerning demographic trends in youth employment.
- Youth unemployment is at its highest level since 2014.
- More than one million young people are currently not in education, employment, or training (NEETs).
- There are 60,000 more NEETs now than when Labour assumed power in July 2024.
- The initial cost of the National Insurance cut is estimated at GBP3.2 billion.
- This cost is projected to fall to GBP2.3 billion due to reduced benefit payouts and increased tax revenues.
- Businesses could save an average of GBP1,545 per young worker annually.
The ‘Jobs Tax’ and youth inactivity debate
This proposal directly responds to what the Conservative party labels Labour’s “Jobs Tax,” a National Insurance increase imposed during Labour’s first Budget. This measure reportedly hit businesses for GBP25 billion.
The timing of the announcement coincides with an ongoing national discussion on youth inactivity. Labour grandee Alan Milburn is preparing a review for Andy Burnham, which is expected to suggest mandatory primary school work experience.
Financial impact on businesses and young people
Businesses could retain thousands of pounds annually by employing young workers, potentially freeing up capital for growth or further hiring. This direct financial incentive aims to make entry-level positions more attractive for employers.
For young people, securing early employment can significantly affect their long-term financial stability. Studies cited suggest that a lack of early work experience can reduce lifetime earnings by hundreds of thousands of pounds.
Broader economic effects of the NI cut
The most significant unanswered question is whether this targeted National Insurance cut will genuinely stimulate widespread youth employment or merely shift hiring patterns.
- Will businesses prioritise 21-24 year olds over other age groups, or will it create new jobs overall?
- How will the proposed savings for businesses translate into actual job creation numbers?
- What specific mechanisms will ensure the projected GBP900 million reduction in net cost is realised?
Competing approaches to youth employment
This proposal reflects a recurring political pattern of addressing youth unemployment through either direct financial incentives for employers or through educational programmes. The Conservative plan focuses on the former.
Labour’s anticipated recommendations, such as work experience and mental health support, represent the latter approach. This mirrors past debates on integrating young people into the workforce.
Upcoming policy announcements and reactions
All eyes will be on the detailed recommendations from Alan Milburn’s review, expected to land on Andy Burnham’s desk soon.
- How will Labour’s proposed solutions, such as primary school work experience, be received by educators and parents?
- Will the CBI’s suggestion of lowering the general National Insurance threshold for all entry-level jobs gain traction?
- What further economic data will emerge regarding youth unemployment trends in the coming months?
How hiring costs affect job seekers
Young people seeking their first job may find more opportunities if businesses perceive the cost of hiring them as lower. This could mean more entry-level positions becoming available.
Businesses considering expanding their workforce, particularly with younger staff, might see a direct financial benefit from these proposed changes. This could influence recruitment decisions and budget allocations for new hires.
Targeted tax cuts offer limited impact
While any effort to tackle youth unemployment is welcome, a targeted National Insurance cut for a narrow age bracket risks being a superficial fix rather than a systemic solution. The focus on reducing employer costs is sound, but the scope is too limited.
The CBI’s call for a broader reduction in the National Insurance threshold for all entry-level jobs offers a more comprehensive approach. This would genuinely encourage businesses to take on new, less experienced staff across the board, rather than just those aged 21-24. True impact requires wider reform.
