MPs demand employer NI cut for under-25s to curb £125bn youth jobless cost
A parliamentary committee is calling for an employer national insurance cut for workers under 25 to reverse a surge in youth unemployment that drains £125 billion annually from the UK economy.
The Work and Pensions Committee is urging the government to eliminate employer national insurance contributions for all workers under 25. The group of MPs cited "overwhelming evidence" that rising employment costs are directly reducing entry-level job vacancies and training programmes.
The current tax structure creates a sudden cost cliff for employers. While companies pay no employer NI for staff under 21, they must pay a 15% levy on earnings above £5,000 for non-apprentices aged 21 to 24. The committee warned this disparity is hitting the retail and hospitality sectors particularly hard, as they rely heavily on this demographic.
This friction stems from an April increase that raised the employer NI rate from 13.8% to 15% and lowered the payment threshold from £9,100 to £5,000. Although the employment allowance was increased to £10,500, critics argue the overall tax burden restricts hiring. The Institute for Fiscal Studies has previously noted that higher minimum wages are not a "major driver" of the youth unemployment crisis, shifting the focus back to employment taxes.
The macroeconomic drag of leaving young people out of the workforce is substantial. Over one million 16 to 24-year-olds are currently classified as Neet. An interim review by former minister Alan Milburn estimated this inactivity costs the UK roughly £125 billion a year through lost economic output and benefit payments.
The committee highlighted that the government currently spends 25 times more on youth benefits than it does on employment support. The proposal also places political pressure on Labour, which explicitly pledged in its 2024 election manifesto not to raise taxes on "working people," specifically ruling out increases to national insurance.
Committee chair Debbie Abrahams stressed the need for a unified strategy, arguing that policy coherence would ensure "no policy unintentionally pulls against attempts to help more young people into work." A government spokesperson responded that the administration is "determined to turn that around by creating real opportunities for young people, reforming education so everyone has a clear path to a good job and providing the support people need to stay and get on in work."
