Budget 2024: Real pay for young graduates down by over £1,000 in three years

Published

2 months ago

March 6, 2024

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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.”

The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open-source information. Through multimedia storytelling, we aim to better explain the world while also showing how our journalism is done.

UK

Sadiq Khan secures convincing win over Tory rival in London mayoral race

Published

15 mins ago

May 4, 2024

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Sadiq Khan secures convincing win over Tory rival in London mayoral race

Labour’s Sadiq Khan has secured a historic third term as London mayor, seeing off Tory challenger Susan Hall.

It followed “wild rumours” the incumbent could have suffered a shock defeat, although both sides subsequently said they believed Mr Khan would win.

He received 1,088,225 votes (43.8%) to be re-elected, a majority of nearly 276,000 over Ms Hall, who secured 812,397 votes (32.7%).

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The results as they come in

It was the first time any candidate for London mayor has won a third term in office, with Mr Khan’s predecessors Boris Johnson and Ken Livingstone both having served two terms.

As he took to the stage to make his victory speech, the re-elected mayor was booed and heckled with a shout of “Khan killed London” by the far-right Britain First candidate, who received fewer votes than Count Binface.

Speaking at City Hall, Mr Khan said: “We faced a campaign of non-stop negativity, but I couldn’t be more proud that we answered the fearmongering with facts, hate with hope, and attempts to divide with efforts to unite.

“We ran a campaign that was in keeping with the spirit and values of this great city, a city that regards our diversity not as a weakness, but as an almighty strength – and one that rejects right hard-wing populism and looks forward, not back.”

He also thanked his family for their support, but apologised for them having to deal with “protests by our home” and “threats”.

While congratulating Mr Khan on his victory, Ms Hall said he should stop “patronising” people who care about London.

When she had previously challenged him in a mayoral debate about “gangs running around with machetes” in the capital, he had said she should “stop watching The Wire” – a gritty US-based crime drama.

In her concession speech, she said: “The thing that matters the most, and to me, is reforming the Met and making London safe again. I hope Sadiq makes this his top priority.

“He owes it to the families of those thousands of people who have lost lives to knife crime under his mayoralty.

“And I hope too that he stops patronising people, like me, who care. This isn’t an episode of The Wire, this is real life on his watch.”

The pair had repeatedly clashed during the campaign, fought out amid concerns about knife crime and the handling of pro-Palestinian marches in the capital.

Just recently, Mr Khan had described his Conservative rival as the “most dangerous candidate I have fought against” over her past social media activity.

Hitting back, Ms Hall said she had “learnt” from her mistakes and branded his comment “outrageous”.

A clear dividing line between the candidates had been Mr Khan’s controversial expansion of the ultra low emission zone (ULEZ), which has been the subject of ongoing protests and which Ms Hall had pledged to scrap.

During the race, the Conservatives were forced to delete a clip used in an advert against Mr Khan’s record on crime after it emerged it used footage of a stampede at a New York subway station.

The result comes after Rishi Sunak’s Tory party took a hammering at the local elections, shedding hundreds of seats and losing more than 10 councils.

Meanwhile, Labour has made gains across the country, winning the Blackpool South by-election with a 26% swing from the Tories and taking control of councils in key battleground areas.

The party also picked up new mayoralties, including the critical regions of East Midlands and York and North Yorkshire, which includes Mr Sunak’s Richmond constituency.

Labour leader Sir Keir Starmer said: “This is effectively the last stop on the journey to the general election and I am really pleased to be able to show we are making progress, we have earned the trust and confidence of voters and we are making progress towards that general election.”

Mr Sunak has taken consolation in the Conservative victory in the Tees Valley mayoral race, which was retained by Lord Houchen and seems to be enough to calm rumblings among discontented Tory MPs.

However, the crunch contest for West Midlands mayor remains on a knife-edge.

Labour has also not had it all its own way, losing control of councils in Oldham and Kirklees after victories for independent candidates opposing the party’s stance on Gaza.

Labour also lost seats on other councils including Bristol, where the Greens extended its lead as the largest party and could now be set to run the city council despite narrowly failing to win outright control.

Notably, all 14 councillors in the newly created Bristol Central constituency are now Green, where the party is looking to unseat Labour’s shadow culture secretary Thangam Debbonaire at the general election.

Sky News elections analyst Professor Michael Thrasher also says although the results are bad news for the Tories, they do not put Labour on course for an overall majority in the Commons in a general election.

The Tories have so far lost 473 seats and control of 12 councils, while Labour has won eight councils and gained 185 seats.

The Liberal Democrats gained 104 seats and won control of Dorset council from the Conservatives, while the Greens are up 74 seats.

UK

Conservatives suffer worst local election results in years – with London and West Midlands mayoral votes still to come

Published

15 hours ago

May 4, 2024

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Conservatives suffer worst local election results in years - with London and West Midlands mayoral votes still to come

The Conservative Party has suffered its worst electoral defeat in years, losing more than half of its councillors who stood for re-election across England.

Labour hailed a “truly historic” result in Rishi Sunak’s own backyard of York and North Yorkshire, where David Skaith smashed Tory Keane Duncan by almost 15,000 votes.

The region, which was electing a mayor for the first time, covers Mr Sunak’s Richmond constituency and is an area Labour has historically struggled to compete in.

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The results as they come in

Speaking at Northallerton Town Football Club, Sir Keir Starmer said: “We’ve had a positive campaign here, and I am very, very proud to stand here as leader of the Labour Party to celebrate this historic victory.

“And it is a historic victory – these are places where we would not have usually had a Labour Party success but we’ve been able to create that success and persuade people to vote for us.”

Sir Keir also renewed his demand that the prime minister call a general election.

The party also had successes in the North East and East Midlands mayoral votes and in the Blackpool by-election.

There was a sliver of hope for the government, with Lord Ben Houtchen holding on to his role as the mayor of Tees Valley.

Analysis: Labour’s future success is less clear-cut after the local elections

Appearing alongside Lord Houchen at a victory rally, Rishi Sunak said: “I’ve got a message for the Labour Party too because they know that they have to win here in order to win a general election – they know that.

“They assumed that Tees Valley would stroll back to them – but it didn’t.”

This victory is likely to have quelled talk of rebellion among disenchanted Tory MPs who had threatened to oust the prime minister if the results proved a disaster, but it remains to be seen whether the Tories can hold on to the West Midlands mayoralty.

Of the 107 councils that held elections on Thursday, 102 have declared their full results, with the Conservatives losing more than half of the seats it has been defending so far.

Some 468 Tory councillors lost their seats as the party lost control of 12 councils.

Sky’s election coverage plan – how to follow

The weekend: Sophy Ridge will host another special edition of the Politics Hub on Saturday from 7pm until 9pm. And Sunday Morning with Trevor Phillips will take a look back over what’s happened from 8.30am until 10am.

How do I watch?: Freeview 233, Sky 501, Virgin 603, BT 313, YouTube and the Sky News website and app. You can also watch Sky News live here, and on YouTube.

The Electoral Dysfunction podcast with Beth Rigby, Jess Phillips and Ruth Davidsonis out now, and Politics at Jack and Sam’s will navigate the big question of where the results leave us ahead of a general election on Sunday.

You can also follow the latest on our politics page

Labour won control of eight councils as it gained 173 seats, while the Liberal Democrats gained 100 seats, the Greens 67, and Reform UK picked up two.

However, Labour suffered setbacks in Oldham and Kirklees, where it lost control of the councils after victories for independent candidates opposing its stance on Gaza.

Sky News elections analyst Professor Michael Thrasher says although the results are bad news for the Tories, they do not put Labour on course for an overall majority in the Commons in a general election.

Further results are expected over the weekend, including key mayoral contests in London and the West Midlands.

Labour’s Sadiq Khan is attempting to secure re-election in London, while Conservative Andy Street is defending his position in the West Midlands.

Rumours had swirled in London since the polls closed that Mr Khan could have suffered a shock defeat to Conservative Susan Hall, however Sky News understands both parties now believe the incumbent will remain in City Hall.

The results of those elections are expected to arrive at 10pm in London and 2.15pm in the West Midlands.

Other results still to be announced include council elections in the South and West of England where the Liberal Democrats and Greens hope to make progress.

There are also metro mayoral elections yet to declare a winner in Greater Manchester, Liverpool City, North Tyneside, South Yorkshire and West Yorkshire.

UK

Sky News projection: Labour on course to be largest party – but short of overall majority

Published

1 day ago

May 3, 2024

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Sky News projection: Labour on course to be largest party - but short of overall majority

After counting more than two million votes cast in the English council elections, a provisional National Share Estimate shows the Conservatives on just 26% of the vote, a 19-point drop compared with the 2019 general election and one of its worst ever performances in any set of local elections.

Labour‘s vote rises from 33% in 2019 to 35% on the current estimate, after more than half the wards have now declared.

The Liberal Democrats are on 16%, an increase of five percentage points on the 2019 election. This follows a familiar pattern where the party does better in council elections than in parliamentary elections.

Local election results: Relief for Sunak in key mayoral race

Other parties, such as the Greens, Reform, and independents, are projected to be on 22%.

This figure assumes also that votes for the nationalist parties in Scotland and Wales, places where no local elections took place, are unchanged from the previous election. The same condition applies to the 18 seats in Northern Ireland.

Assuming these changes in vote share occur uniformly across each of the newly drawn parliamentary constituencies in place for the next general election, Labour wins 294 seats and would overtake the Conservatives – but falls 32 seats short of gaining an overall majority.

The Conservatives fall from 372 seats on the new boundaries to just 242 seats, a projected loss of 130 seats. The Liberal Democrats rise from eight to 38 seats.

As is usual in such projections, there are individual constituencies where the count of local votes shows a party “winning” a constituency when the uniform swing suggests otherwise.

Two such examples are Aldershot and Plymouth Moor View, both of which fall to Labour when we aggregate local votes in wards lying within those constituencies.

Employing the same procedure, however, Labour’s seat tally suffers when local votes in constituencies such as Blackburn and Oldham West were “won” by independents when actual votes are counted.

Labour easily retains these constituencies when uniform swing is considered.