The spiraling cost of living will have a ‘crippling’ impact on young people, experts have warned, as a new report has found those under 30 are disproportionately being forced to bear the brunt of the costs of pension reform. social and covid protection.
A study by the Intergenerational Foundation think tank, to be published on Monday, says young workers are being unfairly targeted by the government in a ‘stealth tax’ caused by the freezing of income tax brackets and the reimbursement threshold student loans, as well as the April National Insurance hike.
According to the report, low-income young people will be hardest hit by the changes, which will have a significant impact on their take-home pay, disposable income and savings potential for housing and pensions.
The researchers calculate that a graduate earning £27,000 a year will see their deductions increase by around 20% over the next four years, from 18% of their salary to 22%. They predict that their disposable income will drop by almost 30%.
They calculate that young workers will pay more than 10 times more National Insurance contributions each year than older workers over 65.
Calling the under-30s the ‘buildhorse generation’, the think tank says they are being targeted by the government, which it says is using high inflation to attract low-income workers earlier, and in particular the youngest, towards the tax.
Angus Hanton, co-founder of the Intergenerational Foundation, said the policies will have a “crippling” impact on the lives of young people.
“Our figures suggest that many young graduates will see their disposable income drop by around 30% over the next four years. So it will really bite. And that’s before you factor in probably a 50% hike in the energy bill in April,” he said.
“It will hit younger generations harder than older generations – in part because they have fewer safety margins. But also, largely because the government taxes labor income so heavily and unearned income so lightly.
Hanton accused the government of being “intergenerationally unfair” in its policies. According to him, this will lead many young people to feel resentment.
“After all they have sacrificed to protect older generations during the pandemic, lower-income younger generations will be forced to bear the cost of government promises to increase social care spending and reduce the debt of Covid-19, while both spending decisions were made to protect older generations,” he said.
Instead, he added, they should charge national insurance on the owner’s earnings and dividends, which he said would be fairer and, according to his calculations, would bring in £24billion a year .
Alana McSkimming, 23, would like to move into her home but lives with her parents as she cannot afford to rent or buy due to the rising cost of living. Woking’s marketing manager feels ‘stuck’.
“I would like to move, I would like to go out on my own, but the cost of living means I would spend everything I earn,” she said. “There would be no disposable income, no savings and realistically I couldn’t move on my own.”
After graduating in 2019, it took her a year to get an apprenticeship and in August she got her current job, working remotely from home. She believes there is ‘huge generational inequality’ – with many young people unable to move up the housing ladder as their parents could have – and fears the generation after her will be worse off. She does not believe that government policies are meant to benefit young people.
“You feel like you never really take the next step in life, you never grow because you’re never able to have a place of your own,” she said. “You don’t feel like you are reaching milestones that your parents would have reached.”
The Institute for Fiscal Studies (IFS) released a report on Thursday saying students in England were being hit by stealth cuts and tax hikes and accused the government of using high inflation to ‘quietly tighten the financial screws’ .
A Treasury spokesperson said: ‘We recognize the pressures people face with the cost of living and are providing support worth around £20billion this financial year and next to help.