Budget 2025: Impact on Graduates

Torsten Bell Excerpts

Tuesday 16th December 2025 Westminster Hall

[The Parliamentary Secretary to the Treasury (Torsten Bell)]

It is always a pleasure to serve under you in the Chair, Mr Turner. I congratulate the hon. Member for Windsor (Jack Rankin) on securing this important debate. Budget discussions, which there have been lots of in the past month, tend to focus on economic statistics, GDP and borrowing. Those are very important, but they can sound abstract. What ultimately matters is what happens to people, including young people, and their wages and bills, the firms they work for and the public services they rely on.

I welcome the hon. Member’s focus on young people and what is happening to their wages, homes and student finance, as well as apprenticeships actually, which he did not touch on much. I also welcome his honesty about a number of the trends and policies put in place by the previous Government. I would add to his critique of the previous Government the 40% fall in youth apprenticeship numbers, which has had a real effect on the volume of routes available to young people.

Across all the fronts that he mentioned, the Government are supporting graduates and, for that matter, non-graduates. I know he would agree that the most important thing we can do for them is to make sure our economy overall is strong, because in the end, that is what provides graduate opportunities. He will be aware that Britain outperformed the growth forecast this year, with growth upgraded from 1% to 1.5%. Lots of things in the long run matter to economic growth, but raising Britain’s investment levels is high up the list. That is why public investment is up by £120 billion and why we place so much emphasis on the old-fashioned idea of actually getting things built in this country. He raised the issue of housing, which I will return to shortly. We have also seen real wages rise more in the first year of this Government than in the first 10 years of the Conservative Government, but there is a lot further to go, and the Budget does go further.

Let me touch on some of the areas that the hon. Member mentioned. On the microeconomic policy side, Britain is already the best place to start a business in Europe. That can be seen clearly in all the statistics, but it needs to be the best place to scale up a business and for a business to stay. That is exactly what we dealt with in the Budget, with tax breaks to make it easier to grow and keep attracting capital and workers. In the long run, that is what creates more graduate jobs, which he rightly focused on.

On the macroeconomic strategy, we aim to support growth by cutting borrowing and inflation. That in turn helps the Bank of England to keep interest rates falling—they have already been cut five times since the election—and that is crucial to give businesses the confidence to invest and to directly cut mortgage bills for millions of Henrys, Henriettas and everybody else, because those with mortgages are disproportionately graduates.

The hon. Member rightly raised the question of assets. He touched on housing but in my day job dealing with pensions, the same thing applies, because the young people he referenced will also be saving for pensions in a very different environment from those who came before them.

Briefly on housing, what are the Government doing? We aim to tackle two things: first, the security of rental accommodation through the Renters’ Rights Act 2025, making sure that if people are renting, whether that is for a temporary period or an extended period, they cannot be evicted at short notice, with no certainty. Secondly, we have to tackle housing costs, and in the long run that means building houses. There is no substitute for that. It means building affordable housing and market housing. The hon. Member mentioned London, where a package of measures has been announced to deal with the building trend over the last few years towards lower building levels than we would like, but we also need to see this around the country. We need to see all enthusiastic MPs not opposing planning permissions when that is their easiest path to take.

On pensions, I will add two things that I think matter for today’s younger generations. The first is the adequacy of the system that they are saving into, largely via defined contribution pension schemes. We have launched the Pensions Commission—I think that has cross-party consensus—to make sure, when we look ahead to 2050, that young people are on course for an adequate retirement. But we also need to address the fact that it is not just the amount of the pension, but the level of risk that younger generations are being asked to bear—in longevity, investment, inflation and other risks. That is exactly what the Pensions Commission is doing.

I agree with most of the comments about young people in the labour market. It is a disgrace that one in eight young people are not in education, employment or training—I think we would all agree about that. Of course, it is a disgrace that we inherited from the Conservatives, as the hon. Member for Windsor is well aware. It is good that the number of NEETs has not continued to rise, but I absolutely agree that it is far too high, and that is on all of us. That is why we have committed to tackling it, not least through a youth guarantee. That needs to continue, as does the work on mental ill health. We have committed to expanding the use of talking therapies in the NHS, delivering an additional 384,000 courses of treatment by 2028-29. There is one thing that I would gently add, in thinking about some of these issues, and mental health is a good example. We must not forget that the long-lasting effects of mental ill health, for example in the labour market, tend to be felt among those with fewer qualifications, even though, on the health side, that affects a very wide range of people.

Turning to tax, we are certainly not hiding from the fact that the Budget asked everybody to make a contribution. The reason for that is simple: people have had enough of failing public services that are not doing the basics, and they know that borrowing levels must be brought down. The hon. Member will know that the Budget reduces borrowing in every single year of the forecast, because spending £1 in every £10 on debt interest rather than on schools and hospitals is already quite enough. The Budget included the freeze on the repayment threshold for plan 2 student loans from April ’27—where the threshold remains above that for other student loans, such as the plan 5 loans.

The hon. Member mentioned some details of the plan 2 rules, which, again—I gently say—were introduced by the Conservatives, who looked to rebalance the system away from having as much taxpayer funding of students in the university system as there had been, with the cost being passed on to individuals. The measures are part of a wider package of reforms, including in relation to higher-value properties, electric vehicles and changes to income tax rates on income from assets. Those are part of the Budget so that we make sure that the wider contributions we are asking for from everybody can be kept to an absolute minimum.

More broadly, there has been a cross-party consensus that a fairer system of university funding will require a lower net contribution to universities from the taxpayer, particularly from taxpayers who did not go to university—I think that the hon. Member still agrees with that. In 2025, 34% of loan debt for full-time plan 2 graduates was forecast not to be repaid, so what we are talking about is still substantive. I agree with him more broadly on the need for other higher-quality qualifications in greater numbers; he will have heard the Prime Minister referring to that in his conference speech earlier this autumn.

We must also not lose sight of something that is still very true, despite the call for more and a wider range of qualifications: graduates still genuinely benefit from higher earnings and higher employment rates. We have talked about NEET numbers, and a degree still provides a very high level of protection against that. That does not mean that we should not continue to focus on ensuring that we get the best value for money for everything that young people go on to do.

It is important that we have a sustainable student finance system, and also one that is fair to students and to the taxpayer. Students will pay nothing back unless they earn above the threshold, as they do now, and no one whose salary remains the same will see their monthly repayments change as the years of the freeze continue. Of course, we will keep the system under review.

I again thank the hon. Member for securing the debate. It is vital that we secure the best possible future for graduates and, I think we all agree, for all young people and the younger generations. We will do that by tackling inflation and making sure that we bring down debt, as well as by ensuring that this is a country where wages and living standards are rising, where people can get things built again and where firms are able to grow. The Budget goes about delivering exactly that.

Question put and agreed to.