UK MPs urge employer NI cut for under-25s to curb youth unemployment
A cross-party group of MPs is calling for a tax cut on employing young workers to address a youth unemployment crisis that costs the British economy £125bn a year.
A group of British MPs is urging the government to eliminate employer national insurance (NI) contributions for all workers under 25. The Work and Pensions Committee said the tax change is necessary to reverse a surge in youth unemployment, warning that rising employment costs are destroying entry-level job vacancies.
Under current UK rules, businesses pay no employer NI for staff under 21 or for apprentices under 25 earning below £50,270. However, employers must pay a 15% rate on earnings above £5,000 for non-apprentices aged 21 to 24. The committee argued this creates a damaging gap that undermines government schemes to improve employment rates.
The recommendation highlights a growing structural friction in the British labour market. Retail and hospitality sectors, which traditionally absorb young workers, have been squeezed by higher wage floors and tax bills. In April last year, the previous government raised the employer NI rate from 13.8% to 15% and lowered the payment threshold from £9,100 to £5,000, though it also increased the employment allowance to £10,500.
The economic stakes of youth unemployment are substantial. Over one million 16 to 24-year-olds are currently classified as Neet—not in education, employment, or training. An interim review by former minister Alan Milburn found this inactivity costs the UK roughly £125bn annually through lost economic output and benefit payments.
Without intervention, the problem will deepen. The review projected that one in six young people are on track to become Neets within five years, up from one in eight today. Furthermore, the government currently spends 25 times more on benefits for young people than it does on programmes supporting them into work.
Committee chair Debbie Abrahams called the lack of policy coherence "inexcusable," noting that parallel benefits cuts for those in training actively undermine apprenticeship drives. "It'll improve policy coherence so no policy unintentionally pulls against attempts to help more young people into work," she said. A government spokesperson responded that it is determined to reform education and create opportunities, stating: "For too long, governments have paid for failure rather than invested in people's success."
