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Andy Burnham must cut job taxes for under-25s to tackle the nation’s unemployment crisis, MPs have declared.
Bosses should only have to pay National Insurance contributions (NICs) on the wages of workers aged 25 or older, the work and pensions committee said.
Currently employers must pay the tax on the earnings of workers aged 21 or older.
MPs said there was “overwhelming evidence” that Rachel Reeves’s £25bn raid on employer NICs, which came into force last year, had contributed to a growing youth unemployment crisis.
The former chancellor raised the tax rate from 13.8pc to 15pc and lowered the pay threshold at which it kicks in, from £9,100 per year to £5,000.
“This has had a knock-on impact on young people. They have been disproportionately affected by slower recruitment, which can then inhibit their future career progression as they struggle to secure their first job,” the MPs warned in a report published on Wednesday.
New data published on Tuesday showed that the unemployment rate for people aged 16 to 24 has hit 16.4pc, its highest rate since 2014, according to the Office for National Statistics.
More than one million people in the same group are not in employment, education or training – known as Neets.
Debbie Abrahams, the Labour MP and chairman of the committee, said young people were “demoralised by the experience of unemployment”.
Alan Milburn, the former Blairite minister and current joblessness tsar, warned last month the nation faced its biggest labour-market crisis in two centuries.
The Government offers support schemes including a Youth Jobs Guarantee, but the committee said these were being undermined by other policies. For example, a 16-year-old can put relatives’ benefits at risk when taking on an apprenticeship. MPs said the lack of coherence was “inexcusable”.
Ms Abrahams said: “Young people face an uphill struggle in current conditions to get that critical work experience.
“Efforts to give young people the best chance to live independently will be in vain if there are too few jobs to go to.
“In a challenging environment, businesses need help to meet rising employment costs. Reducing employer’s NICs for under 25s will enable them to take a chance on talented young people.”
Industries such as hospitality, which traditionally give a large share of young people their first jobs, have been hit hard by the NICs increase.
The tax rise has been “crippling” for smaller businesses, undermining hiring and investment, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
A majority of its members told a survey that Mr Burnham should prioritise cutting business taxes to revive employment and growth.
“The choices of previous administrations have left businesses facing burdens that stifle growth, diminish confidence and discourage investment,” said Alan Vallance, the ICAEW’s chief executive.
“If the new Government is serious about growth, it must create the conditions for businesses to invest, hire and expand.”
