Graduates are facing, what is in effect, a stealth tax raid on their already eye-wateringly high student loans following the Chancellor’s decision to freeze repayment thresholds, a move the Government expects will generate £7.4bn by 2030-31. I was, like a great many others, appalled to hear the Labour Schools Minister Georgia Gould MP in a BBC Newsnight interview admit they were deliberately choosing to freeze thresholds and use higher debt repayments for working but often struggling graduates to fund higher benefit payments for others.
BBC Newsnight interview with Georgia Gould MP (Lab)
This is clearly unfair and needs to stop. We, in the Conservative Party, have previously highlighted the wider challenge created by the backdrop of high inflation, which risks placing additional pressure on a generation already managing significant financial burdens. As Kemi said in Prime Minister’s Questions (PMQs),
‘Policies that may have been fine for 2012, with low interest rates, are not fine for 2026’.
I roundly agree - what worked in 2012 is clearly no longer working and we are open to supporting the Government to make changes to the student loans system. Kemi went on to say,
The Prime Minister is only talking about student loans now because I raised them. He says that the Government are fixing the problem, but the fact is that he is not. Why is it that I am willing to ditch old Conservative policies that do not work, but he wants to keep them? He is not going to do anything about it at all. On Monday, the Government voted to increase benefits yet again. The fact is that the Prime Minister is taking money out of the pockets of graduates and giving it to people who are not working.
It is not just that the Prime Minister is saddling graduates with debt. Yesterday, the Bank of England…said that the Prime Minister’s policies are fuelling youth unemployment. That is not coming from us; that is from the Bank of England. For the first time ever, youth unemployment is now higher here than it is in the EU. While he blames everyone else, our young people cannot get jobs; they are losing hope and even leaving the country. Will the Prime Minister tell us how he plans to deal with that?
Sadly, I am unable to tell constituents how the Labour Prime Minister plans to deal with this as he repeatedly avoided answering the Official Opposition's questions.
Engagements - Hansard - UK Parliament
We believe graduates deserve openness, fairness, and a system that supports ambition rather than penalising it. At Party Conference last year, we set out the first steps of that reform agenda, announcing plans to tackle so-called “debt-trap” courses and reinvest the savings into doubling the apprenticeship budget, with a clear focus on economic growth and high-quality skills training. Working closely with the Shadow Education Team, this marked the beginning of a broader effort to rebalance our post-18 education system so that it works for students, taxpayers and the wider economy alike.
Under this Labour Government, youth unemployment is at its highest in a decade, graduate recruitment is at the lowest level on record, and too many are going straight from education onto benefits with research by the Centre for Social Justice finding 700,000 graduates are out of work and claiming benefits. So, while the Labour Government pursues policies which are resulting in record levels of youth unemployment, the lowest graduate recruitment levels on record and 700,000 graduates on benefits, the Opposition have set out their New Deal for Young People - a step-by-step plan to fix what this Government is making worse.
Plan 2 loan graduates have seen the balance they owe soar for years, even while repayments are made, the interest outstrips monthly repayment. This has led to an endless cycle of often debilitating debt for far too many hard-working people, whilst taxpayers end up having to pick up the tab for those who are never able to fully repay their balance or write off loans, sometimes for those who have never made any repayments. Repayments are structured as a 9 per cent charge on a salary over the threshold, designed to be affordable for lower earners, with the debt is written off if it is not paid back in full after 30 years. However, the Institute for Fiscal Studies estimate that the average Plan 2 graduate now needs to earn £66,000 a year just to keep pace with the interest.
To fix this, the Opposition's New Deal for Young People plan will abolish real interest rates on Plan 2 student loans, ensuring student loan balances will never rise faster than RPI inflation. Under this plan, a doctor in 2029 with £80,000 of student debt will save £58,000 in lifetime repayments and clear their loans sooner, while a graduate with £40,000 of student debt on a salary of £50,000 would save £26,000 in lifetime repayments - and would clear their loan five years faster than under the current system.
As well as abolishing real interest rates on Plan 2 student loans, ending the unfair treadmill of debt, we will fund 100,000 more apprenticeships, lifting the funding cap for apprenticeships for 18–21-year-olds, and ensuring employers have fully funded access to training and college places for every eligible apprentice they recruit. To encourage more employers to take on young people, we would introduce the Business Rebate for Investment in Training and Skills (BRITS) scheme, providing a new incentive of up to £5,000 for businesses to take on 18–21-year-old apprentices. To encourage young people in to work, the first £5,000 of National Insurance, paid by any British citizen starting their first job, will be placed into a personal savings account – earmarked for a first home deposit or future savings - as a £5,000 First Job Bonus. In order to fund this, we need to look closely at the higher education system as a whole.
It is clear too many young people are being sold a promise that simply isn’t being kept. They are paying a very high price for what can be a poor deal — limited face-to-face teaching, tens of thousands of pounds of debt and, too often, no clear job prospects at the end of it. Over the years since Tony Blair announced his 50% university target, we have seen the expansion of low grades requirements to get into university, increasing grade inflation, the abuse of the system by non-UK nationals, over £5 billion in student loans debt accrued from EU students and the graduate earnings premium, used to justify student debt, steadily declining as the number of graduates has grown as well as by increases to the minimum wage.
Bob Blackman, a senior Conservative MP, has said: “We must prioritise home students. Foreign students should not be eligible for loans. We welcome foreign students, but they must be able to pay their way.”
Revealed: The £4bn a year bill for foreign student loans
As Conservatives, our focus is on ensuring the next generation of British students are properly set up for the future. That means being honest about outcomes, driving up quality across the board, and ensuring that every pathway, whether university or apprenticeship, delivers real value and real opportunity. Nobody is better off with £50,000 of debt and no job.
I appreciate people may be concerned about wholesale cuts, for example, to creative arts courses. Please be assured, we would only be looking at cutting low-quality degree courses with many students being better served by undertaking Creative Arts Apprenticeships. In fact, we will apply number controls to every university subject group, which would be progressively reduced where we see the greatest losses for taxpayers and students, while doubling apprenticeship funding by the end of the Parliament.
I do feel for all those young people who have put their faith, as they have been told to do, into their studies to broaden their horizons and are now finding it incredibly difficult to get their foot in the door in the industry they are qualified to work in, all the while knowing their debt is rapidly growing. This cannot be helping anyone’s mental health and frankly, we should all be angry about the impact this is having on our young people. We spend a lot of time talking about the scale of our welfare bill; one of the best ways to limit it from expanding further is by making sure our young people have a quick transition into work from education.
I was also very concerned by a recent IFS report which said student loans “make an appreciable difference to graduates’ living standards” including their ability to “afford mortgage repayments”. I am aware campaign groups are warning the current threshold freeze could block many from getting onto the property ladder altogether and indeed, even starting families. This cannot be right and is certainly not what was intended, by any political party. This comes against a backdrop of a housing crisis and a fall in homeownership among young people and I am pleased the Conservative Opposition has confirmed it will abolish Stamp Duty on primary residences. In contrast, the Labour Government has chosen to cut to Right to Buy, First Time Buyer Stamp Duty relief and the affordable homes to purchase programmes alongside, in their first year in power, the number of net additional dwellings and the number of new homes built both having actually gone down.
I have been raising the various and very real difficulties facing young people repeatedly in Shadow Cabinet meetings, and I know Kemi and my other colleagues are as passionate as I am about getting our offering right for the younger generations. While the Sir Keir Starmer continues to blame past Governments, as Kemi said
The fact is that he is the Prime Minister today. This is a man who got legislation in to fix his own pension—just his, no one else’s. He will not sort out student loans for other people. He has no plan to get young people into work. He has no plan to help graduates to get out of the debt trap...
The Prime Minister has already made 15 U-turns. Will he make another one next week at the spring statement to fix the student loans system?
I believe the Chancellor should act now and adopt the Opposition's New Deal for Young People to end the student loan repayment scam and restore aspiration for young people.
You can sign our petition here:
I do agree with Mr Williamson, education secretary between 2019 and 2021, when he told The Sunday Times:
“Saddling young people with eye-watering debts before they have even begun their working lives is more than unfair: it amounts to a levy on ambition and on the future of this country.”
We can only hope that Labour see sense tomorrow in the spring statement.
