Budget 2024: Real pay for young graduates down by over £1,000 in three years
Graduates in their 20s are earning less in real terms than they were before the 2008 financial crash, and are £1,200 worse off than they were at the start of the pandemic on average, despite recent cuts to national insurance.
Chancellor Jeremy Hunt has teased further national insurance cuts in his upcoming budget, following on from the recent decrease announced in his autumn statement.
It could be welcome news to some who have seen their pay packets squeezed over recent years as a result of the cost of living crisis, though economists have warned tax cuts would be unaffordable and would need to be reversed after an election.
People aged between 22 and 29 are earning less in real terms now than they were in 2002.
This is when factoring in inflation, including rising housing and food costs, over the period.
In 2023 prices, the median salary for a graduate in their 20s is £23,990 after paying taxes and student loan – compared with £25,200 in 2020.
Helen Miller, deputy director of the Institute for Fiscal Studies (IFS), said: “This comes in the context of an ongoing, multi-year freeze to personal tax thresholds.
“By 2027 (the last year of the planned freezes), an employee earning £35,000 will be paying about £440 a year more in direct tax overall as a result of all the changes to income tax and NICs since 2021.
“The government has announced significant tax rises. Regardless of what the chancellor announces in the budget, it is highly likely that this will be the largest tax-raising parliament on record.”
Changes to student loan plans
Student loan repayments are set at 9% of income above the salary threshold, which has been frozen at £27,295 since 2021/22.
Still, a recent graduate on an average income is currently paying around £13 a month towards their student loan, so is it really a big deal?
A big factor in the impact of student debt is not just how much people pay back per month, but how much they pay back over their working lives, and when they started university.
Those who went to university on ‘Plan 2’ higher university fees (£9,000 and above from 2012/13) will pay back almost £20,000 more than the previous ‘Plan 1’ cohort in their lifetime, according to estimates by the IFS.
Those who started in the 2023 academic year or later will be eligible for ‘Plan 5’ student loans, which have different repayment terms.
The threshold will increase in line with the Retail Prices Index (a measure of inflation) instead – meaning it will likely increase more slowly than under the previous policy and more graduates will start paying back their debt sooner.
Under the new system, student debt will only be written off after 40 years rather than 30, meaning many will make repayments for longer, potentially into their 60s.
This particularly affects low to middle earners, who are less likely to have paid off their debt after 30 years.
However, under this new system no borrower will repay more than they borrowed (in real RPI terms) – so the highest earners can expect to repay significantly less than if they had started university in 2022 due to the lower interest rate.
On the other hand, people on lower incomes will end up paying back more.
‘A thundercloud waiting to burst’
Dr Farhana Ghaffar, researcher at the University of East Anglia, has been looking at the impact of the post-2012 loan system on students and young people and interviewed graduates who had been through this system to see how it had affected them.
“The idea was generally that a university degree would set you up for life, so it would set you up for a particular kind of life where you’d be able to have a home, start a family,” she said.
But in exchange for this, students are taking on “enormous” amounts of debt, which can have an emotional impact.
“I think sort of five or six years on, they were constantly worried about the debt that was getting bigger and bigger. And obviously they couldn’t do anything about it.
“They’re not at a stage yet where I think we can kind of talk too much about the long-term impacts. But something that was really striking is it was a future worry.
“You know, ‘when I get a mortgage’ or ‘when I start a family’. Someone described it almost as being like a thundercloud, waiting to burst and they just didn’t know when it would happen.”
Anastasia is a Romanian student at the University of Dundee. Her tuition fees are free because she started studying in Scotland while the UK was part of the EU.
Watch Sky News’s coverage of the Budget live from 11am.
English students still have to pay to study in Scotland but students from other EU countries could study for free, as Scottish students do.
Anastasia isn’t sure if she would have gone to university at all if she had to pay fees.
She said: “I’d have to take a few months to think about it. And really, really think about it. I don’t think it’s a decision I could make just like that.
“If there was a way of knowing the payments would be acceptable and manageable – even though I probably won’t have a good job right after I graduate – maybe I would do that but very low chances.
But Anastasia knows that decision too could affect her future prospects, saying “[we are] in a world where everybody expects you to have a diploma for anything”.
“There are so many companies out there that will not give you the job even though you’re fully able to give them a wonderful performance, if you don’t have a diploma.”
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Business
In Halifax’s night-time economy, no one is holding back over what is required in the budget
In the upstairs bar of a slick new brewery, the cheese-lovers of Halifax are paying “homage to fromage”.
It is one of the first events in the historic West Yorkshire town for the monthly cheese club and there is a decent turn-out.
Sky News visited Halifax’s clubs, bars and restaurants to get an insight into people’s priorities
The night-time economy in Halifax is a useful measure of how the landscapes of our town and cities have changed
Discussion of Wednesday’s budget is not as popular as an accompaniment to the cheese as the selection of wines. But no one holds back on what is required of the chancellor.
Natalie Rogers, who runs her own small business with her partner, said there needs to be focus.
Small business owner Natalie Rogers wants to see more investment in local industries
“I think investing in small businesses, investing in these northern towns, where at one time we were making all the money for the country, can we not get back to that? We’re not investing in local industries.”
At the next table, with a group of friends, Ali Fletcher said there needs to be bigger targets.
“I think wealth inequality is a major problem. The divide is getting wider. For me, a wealth tax is absolutely critical. We need to address this question of ‘Is there any money left?’. There’s plenty of money, it’s all about choices that government make.”
At this monthly cheese club, people told us about their priorities ahead of the budget
The evening’s cheese tasting was being marshalled by Lisa Kempster. “The impression I get from talking to people is there’s a lot of uncertainty, but when you ask them what they’re uncertain about, they’re not really sure, there’s just a general feeling of uncertainty and being cautious.”
Ali Fletcher reckons wealth inequality is a major problem
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Budget will be big – and Starmer has some serious convincing to do
Reeves vows to ‘grip the cost of living’
What tax rises could chancellor announce?
This corner of Halifax, close to the town’s historic Piece Hall, is buzzing with clubs, bars and restaurants, trying hard to defy the crunch in the night-time economy. It is a useful measure of how the landscapes of our town and cities has changed.
“Whenever there’s a budget, for a few days afterwards, there’s a drop off in trade,” said Michael Ainsworth, owner of the Graystone Unity, a bar and music venue in the town.
“I accept the government needs to raise money but, in this day and age, there’s better ways to go about doing that, like closing tax loopholes for the huge businesses to operate up with banking arrangements outside the UK.”
Michael Ainsworth owns a bar and music venue and thinks the chancellor needs to close tax loopholes
In the bar, a folk singer is going through a quirky and caustic set. In the basement, a punk band called Edward Molby is considerably louder.
On a sofa in the main bar, recent graduates Josh Kinsella and Ruby Firth, newly arrived in Halifax because of its more affordable housing, pinpoint what they want on Wednesday.
“Can we stop triple-locking the pensions, please? Stop giving pensioners everything. For God’s sake, I know they have hard times in the 70s and the 80s, but it just feels like we’re now paying for everyone else.”
Josh Kinsella and Ruby Firth feel there’s too much focus on pensioners
Ben Randm is a familiar face at the bar and well known on the music scene with his band, Silver Tongued Rascals.
“Everyday people are seen as statistics, we’re always the afterthought. When the cuts are done, we’re always impeded and the ramifications that has for people’s livelihoods, for people’s mental health, for people’s passion and drive… it’s such a struggle.”
He, like many in the night-time economy sector, wants extra help for hospitality and venues that, he says, provide a vital community link.
Ben Randm who has his own band reckons everyday people are ‘always the afterthought’
David Van Gestel chose Halifax to open the third branch of MAMIL, a bar in jokey honour of those cycling “middle-aged men in Lycra”. On a busy quiz night, he said venues had to provide something different to get people out of their homes.
“I think the government needs to start putting some initiatives in place. They talk about growth but the reality is that the only thing we’re seeing grow is our costs.”
There’s a lot going on at TikTok right now.
As well as online safety updates and new features, the company is introducing sweeping changes to how it moderates the platform’s content.
At the same time, there’s an intense focus on online safety, particularly here in the UK.
With all that going on, Sky News got a rare, exclusive sit-down with one of TikTok’s senior safety executives, Ali Law.
The increasing role of artificial intelligence
One of the biggest changes happening at TikTok is around artificial intelligence.
Like most social media companies, TikTok has used AI to help moderate its platform for years – it is useful for sifting out content that obviously violates policies, and TikTok says it now removes around 85% of violative content without getting a human involved.
File pic: Reuters
Now, it is increasing its use of AI and will be relying less on human moderators. So what’s changed that means TikTok is confident AI can keep young users safe?
“One of the things that has changed is really the sophistication of those models,” said Mr Law, who is TikTok’s director of public policy and government affairs for northern Europe. He explained that AI is now better able to understand context.
“A great example is being able to identify a weapon.”
Whereas previous models may have been able to identify a knife, newer models can tell the difference between a knife being used in a cooking video and a knife in a graphic, violent encounter, according to Mr Law.
“We set a high benchmark when it comes to rolling out new moderation technology.
“In particular, we make sure that we satisfy ourselves that the output of existing moderation processes is either matched or exceeded by anything that we’re doing on a new basis.
“We also make sure the changes are introduced on a gradual basis with human oversight so that if there isn’t a level of delivery in line with what we expect, we can address that.”
Human moderator jobs being cut
That increasing use of AI means TikTok will rely less on its network of tens of thousands of human moderators around the world.
TikTok moderators and union workers protested outside the company’s London headquarters over job cuts
In London alone, the company is proposing to cut more than 400 moderator jobs, although there are reports a number of those jobs will be rehired in other countries.
On 30 October, Paul Nowak, general secretary of the TUC union, said “time and time again” TikTok had “failed to provide a good enough answer” about how the cuts would impact the safety of UK users.
Ali Law speaks to Sky News from TikTok’s European headquarters in Dublin
When Sky News asked if Mr Law could ensure UK users’ safety after the cuts, he said the company’s focus is “always on outcomes”.
“Our focus is on making sure the platform is as safe as possible.
“We will make deployments of the most advanced technology in order to achieve that, working with the many thousands of trust and safety professionals that we will have at TikTok around the world on an ongoing basis.”
Dame Chi Onwurah speaks at the House of Commons. File pic: Reuters
The UK’s science, technology and innovation committee, led by Labour MP Chi Onwurah, has issued a probe into the cuts, with Ms Onwurah calling them “deeply concerning”.
She said AI “just isn’t reliable or safe enough to take on work like this” and there was a “real risk” to UK users.
However, Mr Law said that, as a parent himself, he is “also highly concerned and highly interested in issues of online safety”.
“That’s why I’m so confident in the changes that we are making at TikTok in terms of content moderation as a whole,” he said.
“The power really comes in the combination of the best technology and human experts working together, and that still is the case at TikTok and it will be going forwards as well.”
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UK’s online safety rules: One month on
New wellness tools
The interview came at the end of an online safety event at TikTok’s Dublin office, its European headquarters.
During the conference, the company announced a number of new features designed to increase user safety, including a new in-app Time and Wellbeing hub for TikTok users.
The hub is designed with the Digital Wellness Lab at Boston Children’s Hospital and gamifies mindfulness techniques like affirmations, not using TikTok during the night and lowering your screentime.
Ali Law, TikTok’s director of public policy and government affairs for northern Europe
Read more from Sky News:
Meta to block Instagram and Facebook for users under 16 in Australia
Half of novelists fear AI will replace them entirely, survey finds
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Cori Stott, executive director of the digital wellness lab, said many people use their phones to “set their wellbeing, to reset their emotions, to find these safe spaces, and also to find entertainment”.
The hub was built as part of the TikTok app because young people want wellness tools “where they already are”, without needing to go to a different app, she said.
Still, there are plenty of reports suggesting that phone use and social media has a damaging effect on young people’s mental health… is TikTok trying to solve a problem of its own creation?
“If you are a teen on the app, you will load up and find that you have, if you’re under 16, a private profile, no access to direct messaging, a screen time limit set at an hour, [and at] 10pm sleep hour suggestion,” said Mr Law.
“So the experience is one that does try and promote a balanced approach to using the app and make sure that people have the options to set their own guardrails around this,” he said.
“I think the other thing I’d say is that the content on TikTok is, in the main, inspiring, surprising, creative.”
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