Budget 2025: Impact on Graduates

Jack Rankin Excerpts

Tuesday 16th December 2025 Westminster Hall

[Karl Turner (in the Chair)]

Jack Rankin will move the motion, and the Minister will respond. I remind other Members that they may make a speech only with prior permission from the Member in charge of the debate and from the Minister. No Members have indicated to me that they wish to speak, but Members may try to intervene on the mover of the motion and, indeed, the Minister. As is the convention in a 30-minute debate, there will not be an opportunity for the Member in charge to wind up.

[Jack Rankin (Windsor) (Con)]

I beg to move,

That this House has considered the impact of the Autumn Budget 2025 on graduates.

It is a pleasure to serve under your chairmanship, Mr Turner. I thank the Minister for taking time from his busy schedule to attend the debate today. I will start by painting a picture of two graduates at two different points in their lives—both taxed to death. Let us start with Nick, now 30. He has done all the right things. He got his GCSEs and A-levels, went to a Russell Group university, secured a place on a decent graduate scheme—in London and the south-east perhaps—and has even got himself a lovely girlfriend. Yet Labour’s most recent Budget will see his student loan repayments increase. His rent will go up. He will end up paying more tax because of the freeze on income tax thresholds. At work, his company is making redundancies and blaming rising employer’s national insurance. He cannot buy a house. His finances are pushed to the edge every month, yet a family on his road receiving benefits seem to enjoy the same quality of life without ever leaving the house.

The Centre for Social Justice found that someone would need pre-tax earnings of £71,000 a year to match the disposable income of a family with three children and receiving benefits. Even if Nick earns more, as a headline figure, than someone on benefits, he faces so many extra costs—for commuting, council tax, rent and suits for work—that his disposable income will end up being very similar to, if not less than, that of someone who sits at home. In my view, Nick has every right to feel aggrieved. Writing in the Telegraph at the weekend, I estimated that a young person earning £40,000 a year and renting in my constituency is left with less than £500 a month in disposable income after reasonable expenses.

Then there is Henry, or Henrietta—a high earner, not rich yet—who is perhaps slightly older, and might have excelled working in engineering or a tech start-up. Yes, they may have more disposable income, but often they are still far from financially free. We are seeing a bubble in the data for younger professionals earning just under £100,000, because crossing that threshold, for a parent of two, could well mean a £20,000 tax hit due to the high income child benefit charge and the withdrawal of child support.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing this debate to the House. The plan 2 student loan repayment threshold was frozen until 2030 under new announcements in the Budget. That means that graduates begin repaying sooner, but it is also almost like a hidden tax on career incomes, whereby students will pay more over their working life even if their earnings stay the same. Does he agree that for many students, who could be paying up to £40,000 in student debt, there could be a significant impact on their early month-to-month salary, which could put people off attending university and pursuing their academic dreams?

[Jack Rankin]

I intend to get to the implications of plan 2 loans—both the freeze in the threshold for repayment and the freezing of the interest rates in a falling-interest-rates environment. I think the hon. Gentleman will find in the Budget papers that that raises about as much money as the mansion tax does, for example. I think that is deeply unfair.

More broadly, what is the incentive structure here? Are we not punishing some of our most productive people? Of course many people across the country have it worse, but the point is that Nick, Henry or Henrietta should not have to apologise for striving and being ambitious. After all, it is their tax money that is used to prop up the welfare state, whether that involves benefits, pensions or housing illegal migrants. But they are the lucky ones; we now have about 1 million young people not in work, education or training. Worse still, we have 400,000 graduates claiming out-of-work benefits.

I hear from graduates in my constituency who have applied for hundreds of jobs but get rejected or hear nothing at all. At the end of 2024, the Institute of Student Employers found that, on average, organisations were receiving 140 applications per job.

[Alex Easton (North Down) (Ind)]

With research indicating that up to three quarters of higher education providers could be in deficit by 2025-26, and with plans being drawn up for course closures and staff cuts, does the hon. Member agree that there is an onus on the Government to act so that we secure a richly educated generation of UK graduates, and not simply the educated rich?

[Jack Rankin]

I am not sure that I agree 100% with the hon. Member. I suspect that, in this country, we are sending too many people to university, and we should have a higher focus on higher quality courses and courses that add economic value, while investing some of the money saved in apprenticeships. But I take the hon. Member’s point, which he makes well.

There are hundreds of people, like Nick, who have done everything the right way—just as the system told them to—but who are not seeing the results in their lives. We have a huge disenfranchised cohort of young people, ranging from Gen Zers who have just graduated to millennial young professionals who are trying to get on and start a family.

I am afraid that many are now voting with their feet. In the last year to March, 176,000 people aged 16 to 34 left Britain. Net migration may be down, but that is only because young Brits are fleeing the country under this Government. This is a national crisis, and it is really a question about the future of our country. If young people do not think they can thrive, they will not put down roots and have families, and there will be no next generation to fund the pensions and public services of the future that we will all rely on.

That feeling of disillusionment has not come around by accident. I would not pretend to the Minister, who gives as good as he gets, that my party delivered in some of these areas, particularly in house building and the intergenerational compact, but the past two Budgets have made things demonstrably worse.

The increase to employer’s national insurance in the first Budget created a freeze on hiring, and saw vacancies down and unemployment up. The Office for Budget Responsibility has shown that this could cost almost 50,000 jobs, and stats out today show that unemployment has risen to 5.1%. Increasing the national minimum wage has an impact on hiring and it further squeezes those on middle incomes. It could mean that baristas and shop assistants are dragged into paying back their student loans despite seeing no benefit from the so-called graduate premium.

At this year’s Budget, the Government raised £26 billion on the backs of working people. If the Minister will not take it from me, maybe he will take it from the Resolution Foundation, which found that a worker on £35,000 a year will be £1,400 poorer because of the freeze. It also raised concerns about the negative impact of increasing the minimum wage on levels of employment.

The most directly damaging policy is the latest changes to student loans, which have largely gone under the radar. Freezing the threshold for repayment will mean that as graduates’ starting salaries increase with inflation, they will end up paying more and earlier. There are also the perverse disincentives whereby those on plan 2 loans who earn more than £50,270 per year will pay a higher interest rate of 6% RPI—retail prices index—plus 3%. This means that they will have to earn up to £65,000 before they start paying off the actual loan, rather than simply the interest accumulating on it. They are being punished for success. That interest rate freeze, in an environment where rates are falling, is unjustifiable. Even the New Statesman has been critical of the grad tax, making the point that it will raise roughly the same amount as the mansion tax. Do the Government really see graduate workers as rich or as having the broadest shoulders? They are not being asked to chip in; they are being bled out. Moreover, the Minister and I may have different political perspectives, but an idiot he is not. He knows that national insurance for landlords will be passed straight on to rents, walloping exactly the same people.

All those choices will affect recent graduates: the Intergenerational Foundation estimate that they will pay an extra £24,500 on average as a result of this year’s Budget. But young people everywhere still want what young people everywhere have always wanted—the chance to own a home, start a family, be productive and get on in life.

I want to articulate a centre-right approach where we reform welfare, saving £23 billion, and cut anti-growth taxes such as stamp duty to galvanise the housing market. I have also been pushing for the liberalisation of planning reform and a bonfire of regulation to give young people a future to believe in.

In the light of that, I have several questions to put to the Minister on behalf of all the Nicks, Henrys and Henriettas out there. What message does it send to graduates when their taxes and student loan repayments increase while those on benefits get more? How can the Government explain record low house building in London while some on benefits live in council properties in London worth more than £2 million? What would he say to the young people who are considering leaving these shores because they do not feel that they can get on in life, buy a home and start a family here in Britain? And what risks does he perceive in the impact of the anti-graduate approach on future productivity, and really, the future financial stability of this country?

Independent Schools: VAT and Business Rates Relief

Jack Rankin Excerpts

Monday 3rd March 2025 Westminster Hall

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

It is a pleasure to serve under your chairship, Mr Vickers, and to see the newly minted Minister in his place—I think it is the first time I have been in a debate with him. It is also a pleasure to follow the right hon. Member for East Hampshire (Damian Hinds), who was the Secretary of State; I sometimes see him on the District line, because we head the same way.

I rise to speak on behalf of constituents who have contacted me about this issue—in my inbox, in person at the advice surgery I do every Friday, and on the doorsteps when meeting and greeting voters in the recent general election. This issue comes alongside an array of others raised by mums and dads. I am familiar with the arguments and have read the Government’s response; it contains very compelling figures—94% of schoolchildren in the UK, including my own, attend state schools. I also know that the policy polls very well. However, there is also that 6%, and 14 of those private schools are in the constituency of Ealing Central and Act; in 2023 there were 15, in fact, but one has closed its doors since then. I want to vocalise some of their concerns to my hon. Friend the Minister.

Fourteen is a higher than average number of private schools in a constituency, and the petition was signed by 821 people in the constituency—although that is not even in the top 10. The heat map shows that the top 10 seats all have more than 1,000 signatories. I think two of those constituencies are in Surrey, but the remaining eight tend to have a W, NW or SW postcode. What I am trying to say is that the distribution of the signatures and the schools is a fairly west London-type phenomenon. In fact, if we look at the 650 constituencies across the land, the first one on the list is single digits; it is a seat in Wales starting with A—Aberconwy, or somewhere like that. This is not a phenomenon everywhere, but in west London it is not that unusual.

The high school of the hon. Member for Farnham and Bordon (Gregory Stafford) was not very far from my high school in my constituency. I was a Notting Hill girl, and I know that he was a St Benedict’s pupil back in the day. The prep school of the Minister who is often sent to respond to this debate—my hon. Friend the Member for Ealing North (James Murray), who is my neighbouring MP—was Durston House, and it is in my seat of Ealing Central and Acton. We should not demonise these parents. In some senses, they are people who I have grown up with and live alongside, and they do have genuine concerns.

As a parent, I would never dream of going private, but I can understand and accept that people do. I went to school in the 80s—the dark days of Thatcherism—before the Labour Government reforms that made excellent state schools in my constituency. My parents chose to put me in the state sector for primary school, at Montpelier primary, and as a parent myself, I have benefited from Gordon Brown’s reforms. The child trust fund came to maturity for my son recently; it did go up in the end—it was the one that could go up as well as down. I have not used the private sector as a parent—as a child I did, but it was not my own choice. I completely appreciate that people, like my own parents at the time, make enormous sacrifices to send their children to independent schools, as my hon. Friend the Member for Paisley and Renfrewshire North (Alison Taylor) said. I have heard people say on the doorstep, “We have the worst car. We never go on holiday.” That was me in the ’80s.

I want to point out some unintended consequences of the policy to the Minister aware. These are people who consider themselves to be working people. The strapline of the Labour manifesto was “No taxes on working people”. We should be careful with our rhetoric sometimes and not seek to—[Hon. Members: “Come over here!”] Hang on—let me carry on.

The first unintended consequence—or commonly misstated thing—is that pupils with an education, health and care plan still remain eligible. It is impossible to get one in west London. We have all taken on new wards in our boundaries, so now I do not only represent Ealing borough but a bit of Hammersmith and Fulham too. A head from one of primary schools was saying that they have a large percentage of special educational needs and disabilities pupils. The wards that I have inherited are from the north of the borough—Shepherd’s Bush way. Apparently, by the age that a child goes to school and those issues show up, it is kind of too late. A sharp-elbowed, middle-class parent from the south of the borough might have had their child assessed privately at a very young age, ensuring they have support all the way through, but by school age, there is a waiting list of many years to get the assessment and then it is potluck.

The problem is that the words “private school” imply a whole load of things—but they are not all Eton. Some of the comms around this policy have not been done very sensitively. I know that offence was taken at a comment about how they all have astroturf pitches, swimming pools and embossed stationery; that did not go down well with parents and heads in my constituency. They are not all like that. There are smaller SEND schools and smaller faith schools—what I am trying to say is that they are not all Eton, and some of the comms are based on a caricature. We should be careful about what we do in that regard.

One parent, Matthew, forwarded me a missive from the private school that his boys are at, which read:

“For music lessons with peripatetic teachers employed by the School…VAT will need to be applied at 20%.”

He continued:

“Traditionally the tax system has been a way of discouraging people from picking up bad habits like smoking and drinking. Not from picking up a trombone”.

It seems as though people are capitalising on the policy, and then other things are coming in through the back door.

I have been replying and trying to sound sympathetic to these parents. My constituent also said:

“you referred to a consultation…on the VAT proposals—yet like most government consultations, what was passed didn’t seem, in any significant way, different to what had been proposed.”

Maybe that is a lesson in life for all of us: if we put something out for consultation, we should make it look like we listened, because he is saying that it came back exactly the same.

The right hon Member for East Hampshire raised that elitist private schools such as Eton have actually done quite well out of this policy, because they can cash in on windfalls from the new VAT rules on independent schools—they can claim it back on capital projects, such as buildings and land acquisition, over the last 10 years. All the VAT on costs, which is now 20%, is recoverable when factoring in non-business use, so the policy will basically hand money back to schools such as Eton from Treasury coffers. Surely there is a loophole there—an unintended consequence—that needs to be addressed by my hon. Friend the Minister.

There are long lists of such things. The Times says:

“Eton spent more than £20 million on a sports centre in 2023 and Winchester College’s”—

where I think our former Prime Minister went—

“accounts from the same year said it spent £15 million on capital expenditure”.

It also says that Radley College, in Oxfordshire has a 20-acre solar farm and 40-acre woodland, and that Charterhouse in Surrey

“built two boarding houses in 2021 and is developing a theatre and lecture theatre”

Again, costs can come back for the big boys, but not for the little ones.

[Jack Rankin (Windsor) (Con)]

As the MP for Windsor, Eton is in my constituency. I appreciate, as the hon. Lady says, that not all private schools are Eton, but I point out in its defence that the sports centre she mentioned is used by local schools and community groups, and that Eton does an awful lot in my community. I accept her point that Eton is not among the schools that we necessarily want to focus on in this debate, but I suggest that some of those points are a bit unfair.

[Dr Huq]

It is interesting to learn that—

--- Later in debate ---

[Jack Rankin (Windsor) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Lewell-Buck.

In Windsor, we are very lucky to have some of the finest state and independent schools in this country, and I am proud to represent them all. One has already been mentioned; it is very prominent, but it is not very reflective of the situation in my constituency.

On two constituency visits this morning before I came into Parliament, I counted the independent schools that I passed. I passed six; 23% of the pupils in my constituency attend independent schools. The caricature that my right hon. Friend the Member for East Hampshire (Damian Hinds) said was always in the papers when independent schools are discussed does not reflect 23% of the parents in my constituency.

In my recent surgeries, I have had many parents who are really struggling with the proposed policy. Often, both parents are working, and one of them may have taken on a second job. In many instances, they have remortgaged their house. They have gone without. Many marriages are under pressure, and I am concerned about those parents and their children.

Because we have such a high percentage of independent schools in my constituency, they are not the only ones affected, even though they might be the most directly affected. The displaced children hit my state schools, and that means our state sector is bracing for an influx of children that it will struggle to accommodate. That is why I think this is a false choice: it should not be state versus independent.

Our schools are an ecosystem, and they are all valuable, because education is a public good. It promotes social mobility, strengthens our economy and benefits society at large. No other country in the world tries to tax it. When they have tried—as in Greece, where it lasted only four months—it has massively backfired. In fact, many developed countries look to subsidise independent education to promote parental choice and drive up school standards, so the Government are unique in their policy and, frankly, their vindictiveness.

Whenever the Labour Government hike taxes, there are unintended consequences. Just as their jobs tax is hitting charities and hospices, their tax on independent schools will hit military families and the 130,000 SEND pupils who are currently in independent schools. Many of the parents I have spoken to use those schools as a way of giving their children that extra bit of support that they would struggle to find in the state system. I think every single Member of this House recognises the challenges facing their local authority when it comes to SEND provision.

From my involvement with the all-party parliamentary group on Down syndrome, which my right hon. Friend the Member for East Hampshire chairs, it is clear that getting an EHCP is already an uphill struggle, and taxing independent schools will create the most regressive possible outcome. It will add to the pressures already facing our local authorities, and the SEND children in the existing state provision will pay the highest price.

In a similar vein—the hon. Member for Surrey Heath (Dr Pinkerton) discussed this—2,666 military families in this country rely on independent schools to give their children a stable education. For those families, VAT relief can make all the difference. I previously co-signed a letter that my hon. Friend the Member for Solihull West and Shirley (Dr Shastri-Hurst) sent to the Chancellor, calling on the Government to protect from VAT military families who make use of the continuity of education allowance.

Although the Chancellor has committed to re-rating CEA, I maintain that the full exemption from VAT is needed to truly support military families. That would make a real difference to those enlisted at either of Windsor’s two great garrisons, to whom we owe so much. That support should be given special consideration in the light of the Prime Minister’s discussions over the weekend and in the House today.

Labour Front Benchers frequently refer to parents who pay for independent education enjoying a tax break, but parents actually save the state £8,210—the money it costs to educate a child in the state sector—and receive no compensation for the income taxes that they pay. In my book, that is no tax break at all. Frankly, the numbers do not add up. The Adam Smith Institute has estimated that if even 10% of children move to the state sector—anecdotally, in my constituency I am seeing more than that—any revenue will be nullified. Any more than that 10%, and the policy will actually cost taxpayers money. That highlights the ideology behind the decision.

In my view, the Labour party is playing politics with children’s futures. It is forcing families to have difficult conversations mid-year and make tough decisions. The saddest conversations I have had have been with parents who have felt the need to separate children from classes mid-year. Frankly, only a Labour Government could set out with the aim of improving education in this country and introduce policies that have led to 40 school closures since the Budget.

[Dr Arthur]

The hon. Member is talking with great understanding about the schools in his constituency, including state and independent, which is fantastic to hear. But we have heard in this debate about full state schools in England, about overloaded schools and underfunded schools. He will acknowledge that funding had to be found somewhere to try to fix the problems. We have one solution. Is there an alternative?

[Jack Rankin]

My point is that this will not raise any money. It will exacerbate the problem, because if 10% of the students are displaced, that nullifies the revenue.

One thing that has not been mentioned is that all our local authorities are under some kind of financial strain, and the royal borough of Windsor and Maidenhead is under more than some others. One of the biggest exploding bills on its books is the school transport budget, which this policy harms by putting another unexpected pressure in the system that local authorities will have to pay for. I do not know whether that is in the numbers; perhaps the Minister will comment on that.

I find it almost humorous that some teachers’ unions—it is not often that Conservative Members agree with them—are raising concern about the impact of this policy on staff and pupils in state schools. After only a few months, we are seeing pupils being taken out of private school at three times the previous rate. We will have to wait until September to see the full extent of the damage, as many parents are doing everything they can to get to the end of the school year before, sadly, taking their children out of the schools they love.

In this country, we should be aiming to set the highest standards across the board, using schools that excel in the independent and state sectors as examples of what can be achieved. Labour would rather cut down that aspiration in return for uniformity. We are seeing this attack in their dismantling of the academy system, which has blossomed under successive Governments of all colours. Far from guiding the invisible hand, Labour’s education policy is strangling the school system. I wholeheartedly reject this “politics of envy” policy, which places politics above children, families and the good of the country, but if the Government are determined to stick with it, I urge them to introduce full exemptions for all SEND children, military families and specialist schools.

Oral Answers to Questions

Jack Rankin Excerpts

Monday 16th December 2024 Commons Chamber

[Liz Kendall]

That sounds like a fantastic programme by the YMCA in my hon. Friend’s constituency. That is precisely why we need to join up with what local colleges are doing, with the support provided by local councils and with supported employment programmes run by the NHS. If we join that up and base it on local needs, her young constituent and many others like her will get the chance they need and deserve to build a better life.

[Jack Rankin (Windsor) (Con)]

13. What steps she is taking to reform the health and disability benefits system.

[The Minister for Social Security and Disability (Sir Stephen Timms)]

We want to reform the system to do a much better job in helping people to enter and stay in work. We will publish a Green Paper next spring and we will be discussing our proposals with disabled people.

[Jack Rankin]

To protect those in need and to deliver for taxpayers, we need to take tough decisions. Reforming health and disability benefits will require Ministers to make difficult choices, but so far the plans rely on reducing NHS waiting lists, which the Office for Budget Responsibility has said will have hardly any effect on economic activity. Are Ministers willing to make unpopular decisions to solve this issue and, if so, when?

[Sir Stephen Timms]

I can assure the hon. Gentleman that we will make the right decisions, and they will be set out in our Green Paper in the spring. There is a need to reform the health and disability benefits system—there is no question about that—and we want to talk to disabled people themselves about the details, in order to make sure that we get it right.