Wes Streeting Proposes National Insurance Cut to Encourage Youth Employment
Former Health Secretary Wes Streeting has suggested that reducing employers' National Insurance (NI) contributions could serve as an incentive for businesses to hire more young people.
In an interview with the Sunday Times, Streeting also expressed support for permitting some new oil and gas drilling in the North Sea, citing the potential for increased tax revenue.
Since resigning from the cabinet just over two weeks ago, Streeting has been distancing himself from several policies pursued by Sir Keir Starmer's government.
The former minister, who has indicated he will challenge Sir Keir in any forthcoming Labour leadership contest, has previously stated that the UK's future lies "one day back in the European Union" and has advocated for what he termed a "wealth tax."
Now, Streeting has introduced the idea of a "targeted" reduction in National Insurance as a means to address youth unemployment.
Context of Youth Employment and National Insurance
This suggestion comes shortly after the publication of Alan Milburn's review into the increasing number of young people not in education, employment, or training (NEETs).
"We have to make it easier for business to employ young people and for businesses to take that risk on someone," Streeting told the Sunday Times.
"I think we should be thinking actively about how to incentivise, whether that's through targeted reduction in employers' National Insurance or other kinds of recruitment and retention incentives," he added.
Labour's first budget following its 2024 election victory raised taxes with the specific goal of investing in public services. The employer National Insurance rate was increased from 13.8% to 15% on each employee's salary, and the threshold at which NI applies was lowered from £9,100 to £5,000.
This measure was designed to generate £25 billion annually, with the National Health Service (NHS), which Streeting had overseen until his recent resignation, being a primary beneficiary.
While Streeting has proposed lowering employers' NI contributions, he did not suggest any reductions in NHS funding during his interview.
Insights from Alan Milburn's Review
During his review, Milburn reported that employers had indicated Labour's policies on increasing NI and the minimum wage had discouraged them from hiring young people.
However, Milburn noted that the Low Pay Commission, which monitors these issues, "has concluded that there isn't one straightforward impact" on youth employment rates from the tax and wage increases.
The NEET problem was not triggered two years ago," Milburn said. "It's been going on since time immemorial."
Government Response and Youth Employment Initiatives
Sir Keir's government emphasizes that many young people are already exempt from National Insurance, as employers do not pay NI for workers under 21 years old unless the individual earns more than £50,000 annually.
The government has also prioritized implementing what it describes as the "biggest youth employment reforms in a generation" to assist half a million young people in securing employment.
New initiatives include "youth jobs grants," which provide £3,000 to employers for every person aged 18 to 24 they hire who has been on benefits and seeking work for six months or longer.
Differences Over North Sea Oil and Gas Drilling
Streeting has also sought to distinguish his position from Sir Keir's regarding new drilling for oil and gas in the North Sea.
Labour's 2024 manifesto stated, "we will not issue new licences to explore new fields because they will not take a penny off bills, cannot make us energy secure, and will only accelerate the worsening climate crisis."
Conservative and Reform UK parties have pressured Sir Keir to approve more drilling, arguing it is "reckless" not to utilize domestic resources amid rising energy prices driven by the conflict in Iran.
Energy Secretary Ed Miliband is considering whether to permit drilling in two fields, Jackdaw and Rosebank, where applications were submitted before Labour took office, potentially categorizing them as not "new" projects.
Streeting indicated to the Sunday Times that he supports issuing new licences and believes the government should approve them.
"Yes. I think that's probably where Ed will get to. When he makes a decision, I'd be surprised if that wasn't the case."
"The granting of those licences will not necessarily translate into cheaper bills, but it will translate into higher tax receipts," he added.
Sir Keir maintains that oil and gas extraction from the North Sea will continue regardless of the licence decisions.
However, he asserts that achieving lower energy bills and secure supplies in the future requires a transition to renewable energy sources such as solar and wind power, supported by nuclear generation.
