Chancellor Rachel Reeves is to increase the minimum wage for those aged 21 and over by 6.7% to £12.21, with pay for those aged 18 to 20 to go up by 16.3% to £10 an hour.
This cheeky giveaway – according to the Labour Party – means a full-time employee aged over 20 will earn an extra £1,400 a year. Minimum wage workers – between 18 and 20 – will also see an increase from £8.60 per hour to £10.
Well-intentioned though these might be, not only could such policies backfire but fail to stem the outflow of young Brits seeking pastures new overseas.
For starters, jacking up wages and increasing employers’ National Insurance (NI) contributions could see costs passed on to consumers and other businesses, or indeed reductions in salaries for other workers.
Already, many wealthy Brits and businesses are having second thoughts about investing their time, money and future in Britain. While many Labourites may think good riddance to bad rubbish, good luck to the UK economy without these people and firms.
Labour’s plans could mean less money for business to invest in tech and innovation, meaning less productivity. Sure, this could lead to firms hiring more staff or at least retaining more employees, but for UK plc this remains a bad long-term strategy.
Moreover, costs are relative. Will such inflationary policies actually deal with the elephants in the room: housing and childcare costs for younger Brits?
Just this week it was revealed the fertility rate in England and Wales fell to a record low of 1.44, with Scotland even less fecund at 1.3.
House prices have risen from around four-times average earnings in the mid 1990s to nearly nine-times today. This has contributed to home ownership falling to around 63 per cent and the average age of first time buyers hitting 34.
Officially Labour plans to build 1.5m new homes, but planning reforms are still a major issue, while house builders respond to market conditions more than government diktat, unless Labour wants the state to build homes directly.
Labour has also previously pledged 100,000 new childcare places but is this really going to move the dial either? The point is that hiking up salaries alone cannot improve the lot of younger and ambitious Brits. Instead what is needed is a holistic approach and one which encourages – rather than discourages – investment in British businesses.
For my money, for example, Labour should set aside a fund for young but poorer entrepreneurial Brits – those who cannot rely on start-up cash from their rich parents – to catalyse innovation and self-employment.
It was recently reported meanwhile that many non-doms are eyeing up Singapore as well as other low tax jurisdictions in the face of Labour’s policies. Driving these folks out may seem like a quick win for the Left, but the loss of the people more broadly who bankroll Labour’s beloved NHS could be a spectacular own goal.
Add in the failure to fix housing, crime and anti-social behaviour – as well as a VAT hike on private schools, which will penalise the aspirational middle far more than the mega rich (and impact private schools’ ability to fund scholarships and bursaries to boot) – and what exactly are young and ambitious Brits sticking around for?
To subsidise a welfare and healthcare system they will never get to enjoy? To pay to rent mouldy and drafty flats with little prospect of ever buying an actual (likely overpriced, cramped and crummy) home? How about the incessant worrying that they, their partner or child will be mugged or attacked, perhaps in broad daylight?
Frankly, Labour’s plans do little to sooth these concerns, and just as low skilled migrant labour is mobile, higher skilled talent is even more so. Unless Labour wants to kill the golden goose which funds its welfare state, or worse still lose an entire generation of young wealth creators and worker bees, it needs to do more than jack up wages, stick two fingers up to the rich, and make vague commitments to build a few more homes.
Younger Brits deserve a better deal. But Labour’s plans at best merely scratch the surface.
