By Emma Best
I grew up during the era of Blair on an estate in a deprived area of London. What surrounded me was a generation of vulnerable families trapped on the drip tap of the state, demoralised and resigned to the constraints of life supported by welfare. This shaped my view of politics and the importance of empowering people through policy that, at the earliest point, gives them the opportunity to control their future.
My proposal aims to do this through a reformation of tax policy for young people that would not only make home ownership accessible but also incentivise employment. Under the working title of the ‘Youth Boost’ this policy presents the opportunity to truly put home ownership in the grasp of all young people.
“The cost of living for young people is made more expensive by government intervention and that by taking less away from young people through the tax system, then you would help them save for things like a house.” Chloe Westley
With strong voices in government and throughout the Conservative Party recognising the need to accelerate homeownership and not allow tax to make life unduly hard for young people, the time is right to pitch this policy to sympathetic ears.
The Youth Boost would effectively eradicate basic rate tax for under 25s up to the value of £10,000 by allowing them to claim back these payments for a deposit on a home. Once £10,000 had been accumulated they’d begin to pay basic rate tax again and any higher rate tax would still be paid in a tax year (even if the £10,000 cap had not yet been reached).
While schemes such as ‘Shared Ownership’ and ‘Help to Buy’ opened up the housing market to many who previously found it unobtainable they still exclude those living week to week, or month to month, unable to save at all. Help to Buy, whilst extremely successful, has faced criticism for inflating prices within the new-build market; putting money in the hands of developers as opposed to those looking to climb onto the housing ladder. The Youth Boost would avoid this and with Help to Buy winding down to its end in 2023, now represents the perfect time to invest in this scheme which would truly stimulate social mobility.
Why £10,000?
The average 18 – 24-year-old earns £22,059 per annum. Over seven years paying tax on this salary your total tax bill would be £10,871. Via a 95% LTV mortgage or 5% deposit shared ownership scheme that would provide a budget to look to buy at £200,000 or, if in a couple, £400,000. The average price of all UK properties is £239,000 (Office for National Statistics, 2020) which puts starter homes within budget. With this price bracket in mind developers will more likely begin to bend towards the needs of young people. The feasibility of young people entering the housing market in large numbers with their purses (or wallets) full also means developers will look to appeal to their needs. In the 80s home ownership sky-rocketed from 57% to 68% by the end of the decade thanks in much part due to Thatcher’s revolutionary ‘Right to Buy’ policy. By the early 2000s home ownership was over 70% but has consistently dropped with the emergence of generation rent. On the watch of a Conservative government we cannot allow this to be our legacy.
Stable ties to a community create a wide-ranging plethora of social benefits and also increase one’s personal and financial security. In 2020, research released by Halifax showed that homeowners were up to £3,700 better off per year than renters, demonstrating that in the modern age the financial benefit of home ownership is not only realised in the future but also in the here and now.
The existence of large transient populations must be built on the desire to be free to move and live wherever – not an inability to form stable roots through financial insecurity. One of the main benefits of this policy is that it also incentivises entering the working world. For young people the employment market is often unattractive with a prominence of vacancies in inflexible, unstable and low-paid positions. While there is no silver bullet for tackling the 7% fall in youth employment caused by the coronavirus pandemic, one issue that must be addressed is motivation to work which the effective pay- rise of this proposal provides.
The big question, of course, is how can we afford it? It’s all well and good talking of spending money to solve an issue – but investing amidst the backdrop of recession recovery is another thing. We must invest in certain areas though, and as we look to ‘build, build, build’ our way to economic stability, this policy would certainly help stimulate the construction industry. The eligible ‘Youth Boost’ accumulated for one person over a year could range from £1 - £7,498. To come to some idea of what this means on a year- to-year basis I’m applying the tax payments from an average salary for under 25s to all 3.51 million under 25s in work. That theoretically presents a total of £6.8bn per annum (0.8% of the UK’s £828bn tax bill) that could – at some point - be reclaimed. The UK currently pays £783,734,400 in unemployment benefits to under 25s each year and this potential boost to employment could help reduce these costs significantly.
Additionally, the UK foots a bill of £18bn per annum for housing benefit. Home ownership provides families with financial security for generations and in decades to come the uplift in asset ownership could foreseeably cause a dip in these payments. The cost of Help to Buy has been £16.05bn so far. The Youth Boost could replace it with previous investment into Help to Buy redirected. It also is true that Help to Buy could begin to realise returns in the future which could be re-invested.
The government could look to separate the ‘Youth Boost’ tax payments and allow the UKGI to manage these in order to maximise potential of the fund before it is paid out. No doubt the scheme would have to be identified as a flagship policy worth investing in. However, even if this policy launched tomorrow claims for £10,000 from every young person in the country would not be made overnight. There’d need to be further modelling to project scale of claims in coming years, but this scheme could be steadily invested in over the next few years in preparation.
Margaret Thatcher was a trail blazer who smashed down the barriers between class and home ownership with Right to Buy; the foundation of social mobility for a whole generation. It is within our grasp, as modern Conservatives, to take the next revolutionary step. I would implore you to consider the wave of change this proposal could allow for where the surface has only begun to be scratched in this article.
Emma won first prize in the CYW inaugural Policy Essay Competition for this article.
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