Budget raises young workers’ pay but leaves jobs and student loans unresolved

The Budget offers under-25s a higher minimum wage for some young workers, new help with saving for a first home and a planned allowance for young entrepreneurs. But it leaves action on youth unemployment and student-loan reform for later, with ministers awaiting recommendations on jobs and saying the repayment system is under review.

From next April, the minimum wage for 18- to 20-year-olds will rise by 3.9% to £11.27 an hour. The rate for workers over 20 will be £13.21. The increase preserves the gap between the age bands, despite Labour’s earlier promise to move towards a single adult rate.

For some young workers, the rise also has a knock-on effect on student-loan repayments. A 21-year-old working full-time on the minimum wage, with a loan taken out after 2023, will earn enough to pass the £25,000 repayment threshold. They will then begin repaying 9% of earnings above that threshold.

Help with buying a home

A new First Time Buyer Isa is due to launch in 2029, replacing the Lifetime Isa. Savers will be able to deposit up to £4,000 a year, with the government adding a 25% bonus. The £450,000 property cap will remain, but the new account is intended to avoid making savers lose their own contributions when withdrawing money for an ineligible purpose. The government also plans to reduce withdrawal penalties on existing Lifetime Isas.

Separately, the £4.7bn Your First Home scheme for England is intended to help 70,000 individuals and couples buy new-build homes. It offers a loan worth 20% of a property’s value to buyers with a 2.5% deposit. Eligibility is capped at combined incomes of £110,000 outside London and £140,000 in the capital.

The Budget also announced a pilot Young Entrepreneurs Allowance in England. It is intended to help cover living costs during the first year of a new business, but the government has yet to set out detailed terms or a launch date beyond saying it will be introduced “shortly”.

Jobs and loans still unresolved

For more than a million 18- to 24-year-olds not in work, education or training, the Budget brought no immediate jobs package. Ministers are waiting for Alan Milburn’s recommendations on the issue, due later this year. Healey said the government was looking forward to his final report.

Student-loan reform was also absent. The issue is particularly pressing for borrowers on Plan 2 loans, taken out between 2012 and 2023. Chief Secretary to the Treasury Emma Reynolds told the BBC the system was “under review”, adding: “We inherited a system that is difficult and unfair on young people, but we weren't able to move on that today.”

The Budget therefore sets out several targeted measures for young people, but some of its most consequential questions—how to address youth inactivity and whether to change student-loan repayments—remain for future decisions.