Tories pledge to halve employer national insurance for young people

What is employer National Insurance, and how would the Conservatives’ pledge change it for workers aged 21 to 24?

Employer National Insurance is a tax businesses pay when they employ people. It adds to the cost of each job, alongside wages and other employment costs. The Conservatives say lowering it could make young workers cheaper to hire and improve their job prospects.

Under the pledge, the employer rate for workers aged 21 to 24 would fall from 15% to 7.5%. The change would apply to jobs worked by people in that age group, rather than reducing National Insurance for every employee. The Conservatives say the policy would put tens of thousands of young people into work.

The proposal matters because 981,000 people aged 16 to 24 were not in education, employment, or training between April and June, according to the latest figures cited. However, the policy is only a pledge, dependent on the Conservatives winning the next election. Officials said they would publish savings explaining how it would be funded.

How large is the proposed tax cut, and how much would it cost the government?

The tax change would reduce the employer National Insurance rate by half for jobs held by 21- to 24-year-olds. In percentage-point terms, that is a 7.5-point reduction, from 15% to 7.5%. The size of the cut is significant because it applies across qualifying youth jobs.

Officials put the policy’s “static” cost at £3.25 billion. That figure describes the straightforward loss of National Insurance revenue if the tax rate changes, without allowing for wider economic effects. It is therefore the headline cost before estimated behavioural responses are included.

The Conservatives estimate a lower “dynamic” cost of £2.3 billion in 2029-30. Their calculation assumes that cheaper youth employment will create extra jobs, bringing in more income tax and other receipts. It also assumes that fewer people will claim universal credit. Labour disputes the figures, calling the proposal “fantasy economics” and “unfunded.”

What does the Conservatives’ plan assume will happen to youth employment, tax receipts and benefit spending?

The plan rests on a chain of expected effects. First, reducing the cost of employing young people should encourage businesses to create more jobs or hire more applicants. The Conservatives say this would help tens of thousands of young people into work and reduce unemployment among under-25s.

The proposed mechanism is straightforward. Employers would pay less National Insurance on qualifying workers, cutting the total cost of each job. If more young people enter employment, they should pay taxes through their earnings. At the same time, some people who would otherwise receive universal credit could become workers instead.

Those assumptions explain the difference between the policy’s static and dynamic costs. Officials say the initial £3.25 billion cost could fall to £2.3 billion in 2029-30 after extra tax receipts and lower benefit spending are counted. These are forecasts, not guaranteed outcomes. Labour has challenged them as unfunded and unrealistic.

Why are young people the focus of this policy, and how many 16- to 24-year-olds are currently not in education, employment or training?

Young people are the focus because the Conservatives argue they face worse employment prospects than other groups. Kemi Badenoch described a “graduate recruitment crisis” and said youth jobs needed special help. Lowering the cost of employing younger workers is intended to make businesses more willing to recruit them.

The scale of the problem is large. The article cites Office for National Statistics figures showing that an estimated 981,000 people aged 16 to 24 were not in education, employment, or training between April and June. This group is commonly described as NEET, meaning not in education, employment, or training.

The proposal forms part of a wider Conservative approach. The party also said under-25s who had not worked continuously for six months could be prevented from claiming universal credit. That “tough love” policy would restrict benefits, while the National Insurance cut would reduce hiring costs. The impact would depend on whether employers actually create more youth jobs.

What is the difference between the policy’s £3.25 billion “static” cost and its estimated £2.3 billion “dynamic” cost?

A static cost measures what the policy would cost if everything else stayed unchanged. For this proposal, it is estimated at £3.25 billion. That calculation reflects the direct reduction in National Insurance collected from employers after the rate for 21- to 24-year-olds is halved.

A dynamic cost includes expected changes in behaviour and the wider economy. The Conservatives argue that a lower payroll tax would lead to more youth employment. Those additional workers could pay taxes, while some could stop claiming universal credit. Both effects would offset part of the lost National Insurance revenue.

Using those assumptions, officials estimate the dynamic cost would be £2.3 billion in 2029-30. The difference between the two figures is therefore £950 million. The lower figure is a forecast rather than an immediate saving. Labour has rejected the calculation, describing the tax cut as “fantasy economics” and “unfunded.”

How do the Conservatives’ proposals differ from Labour’s and Reform UK’s approaches to helping or taxing workers?

The Conservatives’ approach combines a targeted employer tax cut with tougher benefit conditions for under-25s. They would halve employer National Insurance for workers aged 21 to 24 and restrict universal credit for some young people who have not worked continuously for six months. Their stated aim is to make hiring cheaper and push more people into work.

Labour’s approach, as described by its spokesperson, focuses on direct employment support. It says it is investing £2.5 billion to help young people into work, including a national rollout of the Jobs Guarantee. Labour also attacks the Conservative proposal as unfunded and says the party cannot be trusted with public finances.

Reform UK proposes a broader tax cut. Its Treasury spokesman says Reform would reverse Rachel Reeves’s “jobs tax” for all British workers, rather than targeting only 21- to 24-year-olds. Reform says it would fund that measure through a tax on migrants. These are competing political proposals, not current policy changes.

How can a tax paid by employers affect decisions about hiring, wages and the number of jobs available?

Employer National Insurance is part of a worker’s total employment cost. When that cost rises, a business may find a planned hire less affordable. It could delay recruitment, reduce the wage it offers, cut hours, or decide not to create the job. The exact response depends on the business and labour market.

If the tax falls, the opposite incentives can apply. A business could use the saving to hire someone it would otherwise reject, increase a wage offer, expand hours, or retain more money. For example, halving the rate on a qualifying young worker would reduce the employer’s payroll cost, making that applicant cheaper to employ than before.

The Conservatives rely on this mechanism to forecast tens of thousands of extra youth jobs. More employment could also increase tax receipts and reduce benefit spending. But the article gives forecasts rather than measured results, so it does not establish how many jobs would be created or how employers would divide savings between hiring, wages, and profits.

Key Facts:

📌 Employer National Insurance is paid by businesses on their employees’ earnings.

📌 The proposed rate would fall from 15% to 7.5%.

📌 The cut would target workers aged 21 to 24.

📌 The employer rate would drop by 7.5 percentage points.

📌 The static cost is estimated at £3.25 billion.

📌 The dynamic cost is forecast at £2.3 billion in 2029-30.

📌 The Conservatives forecast tens of thousands of additional youth jobs.