Andy Burnham, the newly appointed Labour Party Prime Minister, is under pressure to address the escalating youth unemployment crisis by slashing job taxes for workers under 25. The Work and Pensions Committee has recommended that companies should only pay National Insurance contributions (NICs) on wages for employees aged 25 and over.
In a report released Wednesday, MPs highlighted “overwhelming evidence” that a £25 billion increase in employer NICs has significantly contributed to rising unemployment among young people. Former Chancellor Rachel Reeves, widely regarded as responsible for this increase, had raised the NIC rate to 15% and lowered the threshold at which contributions begin from £9,100 to £5,000 per year.
“This policy has had a disproportionate effect on young workers, leading to slower hiring rates and limiting their ability to secure vital first jobs, which in turn affects their long-term career prospects,” the report stated.
READ MORE: Andy Burnham Announces 20% Business Rates Cut for Pubs, Clubs, and Live Music Venues
READ MORE: Andy Burnham to Announce DWP Benefits Cuts Focusing on Youth Education and Employment
Debbie Abrahams, Labour MP and chair of the committee, emphasized the challenges faced by young people today: “Many are demoralized by unemployment and struggle to gain the necessary experience to live independently. With few jobs available, efforts to support young workers will fail.”
Abrahams further asserted that helping businesses manage rising employment costs is crucial. “Reducing employer NICs for under-25s would encourage companies to invest in young talent,” she said.
Following the report, Chancellor Rachel Reeves has been replaced by John Healey in the first governmental reshuffle under Burnham’s premiership. Industry leaders like Alan Vallance, CEO of the Institute of Chartered Accountants in England and Wales (ICAEW), stressed the importance of reform. “Previous government decisions have burdened businesses, hindering growth and investment. The new government must foster an environment conducive to hiring and expansion if it desires sustained economic growth,” Vallance remarked.
The debate over NIC reform marks a critical moment for Burnham’s administration as it seeks to tackle youth unemployment and stimulate business confidence.