A common trope in post-Brexit policymaking is to learn from other countries. With our newfound freedom from the EU, we can be bold in innovating our economy. This futuristic vision is often dubbed Singapore-on-Thames. It aims to see Britain transformed into a low-tax, light-regulation capitalist utopia. I have opted for something closer to home and easily achievable. I propose that the government scraps income tax for all under-25s. This policy, inspired by Hungary, would be a bold return to supply-side economics for the Conservative Party and accelerate Britain’s recovery from the pandemic – as well as avoiding a future brain drain.
The Left-Behind Generation
Currently, Britain squeezes young people through aggressive taxation. Nowhere is this more obvious than the announced 1.25 percent rise in National Insurance. This actively punishes young people who choose to go to university. Young graduates earning more than £27,295 will pay a marginal tax rate of 42.25 percent, split as 20 percent income, 13.25 percent National Insurance, 9 percent loan repayments. Research by the Intergenerational Foundation has shown that government health spending per person is significantly higher for pensioners than for working-age adults. Taxation in the UK is a clear and obvious wealth transfer from young to old.
None of this is in keeping with the traditions of the Conservative Party, which should champion individualism, small government, low taxes, and – most importantly – reward ambition. Today’s system does the opposite. Hardworking people are squeezed by the state. The Tory consensus should be that money spent by the Government is less efficient than by individuals, due to the many layers of bureaucracy lying between taxation and spending. Young people are right to ask what they are getting back from all this excessive taxation.
This goes hand-in-hand with the Government’s response to the pandemic. Throughout consecutive lockdowns, young people have been forced to sacrifice their social lives, their higher education, and their mental health to protect Britain from a virus which overwhelmingly kills the elderly. As much as it will be denied, these lockdowns laid the groundwork for our current inflation crisis with the Government’s generous furlough scheme.
Altogether, this paints an unflattering picture of Britain. Our country does not look after its own young people and – by extension – is dooming its own future. This will become an existential problem if young people decide that their ambitions would be better rewarded overseas. Any country which becomes unattractive for this age-group to live in is vulnerable to a brain drain. This should be treated as an increasingly likely scenario, and it has to be emphasised just how destructive this would be.
Human capital flight would gut Britain of its workface and cause the welfare state to collapse under its own weight. The US, for example, has the potential to be incredibly appealing to young Brits. Forget the poverty porn produced by the BBC which desperately tries to convince you that America is a backwater for rednecks. Our neighbours enjoy higher median income ($19,306 compared to our $14,793), cheaper homes, and happier citizens. On the other side of the world, the recent UK-Australia Free Trade Agreement has made it far easier to move Down Under for work. With a high median wage ($17,076) and beautiful sunshine it is a highly tempting option.
Scrap Income Tax for Young People
My policy is simple: scrap income tax for under-25s. Inspired by the Hungarians, I believe to unleash Britain’s potential, we must remove barriers to benefiting from your own hard work.
This policy has been gaining popularity recently across Europe. In Hungary, under-25s are exempt from paying income tax, justified as a way to accelerate their economic recovery from the pandemic. Croatia have adopted the same policy, alongside an income tax cut of 50 percent to those aged 26-30. In Poland, under-26s earning £15,667 were made exempt from the 18 percent basic rate of tax – a generous allowance considering the average Polish salary at the time was just below £10,990. The purpose of this policy to reverse their own brain drain by tempting expatriates to return home.
The Impacts
This tax break has the potential to supercharge the economy. Young people would be gifted a golden opportunity at an age where they still have endless energy. Every student would have the incentive to work a job on the side – because they know they must take the chance to make untaxed income whilst they still can. This would have positive effects across the economy, such as weakening our reliance on mass immigration for filling low-wage jobs. The Tories cannot run from lowering immigration forever. Young entrepreneurs would be given the freedom to innovate and build new companies. As noted in Britannia Unchained, the most entrepreneurial societies do not stigmatise failure – a weakness of modern Britain. Our current taxation regime instils fear of financial ruin for young, ambitious start-ups.
As mentioned before, it appears the “levelling-up” agenda has been hijacked by Keynesians who have made tax-and-spend seem like an inevitability if the party is to hold the Red Wall. We must not needlessly sacrifice our principles in pursuit of “levelling-up”. Voters want to see improvements to their lives and the lives of their children. A tax cut which rewards hard work would be welcomed across left-behind industrial towns as the youth would be given the breathing-space to revitalise their own communities.
Beyond economics, there are huge political opportunities tied to this policy. The Conservatives have a problem with the youth vote. In 2019, they won the support of just 19 percent of 18-to 24-year-olds. This was even lower than in 2017. However, studies show that young people are not inherently left-wing. A 2021 study by Redfield & Wilton Strategies uncovered surprising results. The data showed support for raising taxes steadily increasing with age, ending with 62 percent of those aged 65+ saying they would be more likely to vote for a party of tax-and-spend.
Furthermore, in response to the question: “when trying to balance its finances, should the Government rely on tax increases or spending cuts?”, a decisive 60 percent of respondents aged 18-24 chose the latter. These numbers indicate that the 2019 Labour vote was a protest against the current system rather than an endorsement of socialism. To many young people in this country, the only ‘capitalism’ they have ever known is one which rewards the old while taking from the young.
Whilst austerity was necessary, it is hard to deny that young people absorbed the brunt of many cuts, whilst the elderly had their pensions triple locked. Jeremy Corbyn demonstrated the power of youth politics, whilst himself denouncing Theresa May’s social care reforms – which could have been a huge success in lowering house prices for young people – as a “dementia tax”. There is no reason why the Conservatives should give up on winning the votes of young people when free-market economics have the potential of delivering prosperity to my generation.
Budapest-on-Thames
A common trope in post-Brexit policymaking is to learn from other countries. With our newfound freedom from the EU, we can be bold in innovating our economy. This futuristic vision is often dubbed Singapore-on-Thames. It aims to see Britain transformed into a low-tax, light-regulation capitalist utopia. I have opted for something closer to home and easily achievable. I propose that the government scraps income tax for all under-25s. This policy, inspired by Hungary, would be a bold return to supply-side economics for the Conservative Party and accelerate Britain’s recovery from the pandemic – as well as avoiding a future brain drain.
The Left-Behind Generation
Currently, Britain squeezes young people through aggressive taxation. Nowhere is this more obvious than the announced 1.25 percent rise in National Insurance. This actively punishes young people who choose to go to university. Young graduates earning more than £27,295 will pay a marginal tax rate of 42.25 percent, split as 20 percent income, 13.25 percent National Insurance, 9 percent loan repayments. Research by the Intergenerational Foundation has shown that government health spending per person is significantly higher for pensioners than for working-age adults. Taxation in the UK is a clear and obvious wealth transfer from young to old.
None of this is in keeping with the traditions of the Conservative Party, which should champion individualism, small government, low taxes, and – most importantly – reward ambition. Today’s system does the opposite. Hardworking people are squeezed by the state. The Tory consensus should be that money spent by the Government is less efficient than by individuals, due to the many layers of bureaucracy lying between taxation and spending. Young people are right to ask what they are getting back from all this excessive taxation.
This goes hand-in-hand with the Government’s response to the pandemic. Throughout consecutive lockdowns, young people have been forced to sacrifice their social lives, their higher education, and their mental health to protect Britain from a virus which overwhelmingly kills the elderly. As much as it will be denied, these lockdowns laid the groundwork for our current inflation crisis with the Government’s generous furlough scheme.
Altogether, this paints an unflattering picture of Britain. Our country does not look after its own young people and – by extension – is dooming its own future. This will become an existential problem if young people decide that their ambitions would be better rewarded overseas. Any country which becomes unattractive for this age-group to live in is vulnerable to a brain drain. This should be treated as an increasingly likely scenario, and it has to be emphasised just how destructive this would be.
Human capital flight would gut Britain of its workface and cause the welfare state to collapse under its own weight. The US, for example, has the potential to be incredibly appealing to young Brits. Forget the poverty porn produced by the BBC which desperately tries to convince you that America is a backwater for rednecks. Our neighbours enjoy higher median income ($19,306 compared to our $14,793), cheaper homes, and happier citizens. On the other side of the world, the recent UK-Australia Free Trade Agreement has made it far easier to move Down Under for work. With a high median wage ($17,076) and beautiful sunshine it is a highly tempting option.
Scrap Income Tax for Young People
My policy is simple: scrap income tax for under-25s. Inspired by the Hungarians, I believe to unleash Britain’s potential, we must remove barriers to benefiting from your own hard work.
This policy has been gaining popularity recently across Europe. In Hungary, under-25s are exempt from paying income tax, justified as a way to accelerate their economic recovery from the pandemic. Croatia have adopted the same policy, alongside an income tax cut of 50 percent to those aged 26-30. In Poland, under-26s earning £15,667 were made exempt from the 18 percent basic rate of tax – a generous allowance considering the average Polish salary at the time was just below £10,990. The purpose of this policy to reverse their own brain drain by tempting expatriates to return home.
The Impacts
This tax break has the potential to supercharge the economy. Young people would be gifted a golden opportunity at an age where they still have endless energy. Every student would have the incentive to work a job on the side – because they know they must take the chance to make untaxed income whilst they still can. This would have positive effects across the economy, such as weakening our reliance on mass immigration for filling low-wage jobs. The Tories cannot run from lowering immigration forever. Young entrepreneurs would be given the freedom to innovate and build new companies. As noted in Britannia Unchained, the most entrepreneurial societies do not stigmatise failure – a weakness of modern Britain. Our current taxation regime instils fear of financial ruin for young, ambitious start-ups.
As mentioned before, it appears the “levelling-up” agenda has been hijacked by Keynesians who have made tax-and-spend seem like an inevitability if the party is to hold the Red Wall. We must not needlessly sacrifice our principles in pursuit of “levelling-up”. Voters want to see improvements to their lives and the lives of their children. A tax cut which rewards hard work would be welcomed across left-behind industrial towns as the youth would be given the breathing-space to revitalise their own communities.
Beyond economics, there are huge political opportunities tied to this policy. The Conservatives have a problem with the youth vote. In 2019, they won the support of just 19 percent of 18-to 24-year-olds. This was even lower than in 2017. However, studies show that young people are not inherently left-wing. A 2021 study by Redfield & Wilton Strategies uncovered surprising results. The data showed support for raising taxes steadily increasing with age, ending with 62 percent of those aged 65+ saying they would be more likely to vote for a party of tax-and-spend.
Furthermore, in response to the question: “when trying to balance its finances, should the Government rely on tax increases or spending cuts?”, a decisive 60 percent of respondents aged 18-24 chose the latter. These numbers indicate that the 2019 Labour vote was a protest against the current system rather than an endorsement of socialism. To many young people in this country, the only ‘capitalism’ they have ever known is one which rewards the old while taking from the young.
Whilst austerity was necessary, it is hard to deny that young people absorbed the brunt of many cuts, whilst the elderly had their pensions triple locked. Jeremy Corbyn demonstrated the power of youth politics, whilst himself denouncing Theresa May’s social care reforms – which could have been a huge success in lowering house prices for young people – as a “dementia tax”. There is no reason why the Conservatives should give up on winning the votes of young people when free-market economics have the potential of delivering prosperity to my generation.
Conclusion
Generational inequality is well-trodden ground. A new column appears each week condemning this government for its treatment of young people. However, in my experience, very few solutions are ever put forward. This policy is not a handout. This policy is not egalitarian. This policy is fundamentally Conservative and gives power back to the individual. It rewards ambition and hard work, as all just economic policies should.