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On Wednesday, Chancellor Rachel Reeves announced the contents of her long-awaited
budget that, in her own words, looked to “balance the books.” As in all budgets, there is a
plethora of fiscal changes and economic alterations that can be challenging to navigate,
especially as these measures vary in how they affect people depending on their financial and
social circumstances. Certain measures are more clear-cut in how they will affect people and
businesses; an increase in tax for homes above the value of £2 million will directly affect
certain property owners for example, but how this year’s budget may affect students is much
less obvious. Whilst the shock of the sugar tax now extending to milk-based drinks is of
course devastating for student productivity levels, there are other measures that could have a
deeper impact on students.
One of the positives of this year’s budget is a potential pay rise for students working
minimum-wage jobs, as the National Living Wage has increased from £12.21 an hour to
£12.71 for those over 21, and from £10 to £10.85 for 18–20-year-olds. This, as well as a
freeze in train fares, means that students with part-time or seasonal jobs will have more
disposable income for those earning under £12,570 a year. However, Reeves also placed an
extension on freezing the income tax threshold, meaning the current tax brackets will remain
at their current rate until 2031. Current income tax for those earning between £12,570–
£50,000 is 20%, but this is now frozen. This is unlikely to affect a large quantity of students,
but it may have a greater impact on graduating students entering the workforce, who could be
pushed into a higher tax bracket if inflation drastically increases between now and 2031. But
what may be even more troubling for students is a 2% increase in income tax on rented
properties. Whilst this is on landlords, the Office for Budget Responsibility warns this tax
burden will more likely be pushed onto tenants, resulting in increased rent over the long term.
Whilst this would affect everyone paying property rent, it may force students to re-think
where to live during term time in the eventuality that rent prices do increase.
More generally, financial analysts have criticised the impact the budget will have on
businesses, with director-general of the British Chambers of Commerce Shevaun Haviland
criticising the budget for not “delivering more transformational growth.” Meanwhile, growth
forecasts from the OBR have been lowered since the announcement of the budget, with yields
not set to increase drastically over the medium to long term above the rate of inflation. This
will have a particular impact on students applying for jobs once they’ve graduated, as less
finance within firms means less room for new entry-level jobs. Again, whilst slow growth can
impact the entire country, the concern for students is that it is more difficult to smoothly enter
an already competitive job market.
Much of these concerns are speculative, as it will take time before we see exactly how this
budget will filter down into the wider UK economy. However, it is important to understand
the contents of the budget in order to prepare for the potential long-term side effects that may
affect young people in the UK. Whilst Chancellor Reeves hasn’t directly targeted students in
Wednesday’s budget, students aren’t immune to the long-term implications of government
fiscal policy changes
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