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Young adults in the UK face a “perfect storm” of economic challenges, the head of the influential Treasury select committee has warned as it launches an inquiry into student loans.
The cross-party committee’s investigation comes as the government considers ways to ease the burden on graduates, amid a growing backlash about high interest rates and hefty repayments, including among Labour MPs.
Rachel Reeves’s decision in her November budget to freeze the threshold at which loans start to be repaid for three years from 2027 reignited anger over the system.
The select committee is asking people to contribute their experiences through an online portal. The committee chair, Meg Hillier, said she saw the burden of student loans as part of a wider squeeze facing people in their 20s and 30s.
Hillier, the MP for Hackney South and Shoreditch in London since 2005, said: “I represent a young borough. One of my concerns is the layering and layering of challenges on that generation.” She cited the eyewatering cost of housing, inadequate pensions saving, and the looming jobs threat from AI.
“Every government will make what seem like rational decisions in their own silo. So you can look at student loans, you can look at renting, you can look at home ownership, you can look at pensions. But cumulatively, the 20-to-30 generation has had a lot piled on them. It’s about fairness in the end.”
Hillier hailed the rising proportion of her own constituents who now go to university, helped by the significant improvement in London schools since she was first elected.
However, she warned: “Now those young people are coming out and finding rents are sky high. House prices in my area are particularly high. You couldn’t possibly be a young person locally and look across the road and think, ‘I’ll buy that property that’s being built,’ because they’re £650,000 for a two-bedroom flat, or £750,000.”
She suggests high housing costs partly explain falling birthrates in London, which is contributing to lower school rolls and in some cases, school closures.
“Housing costs are having a big impact on that,” Hillier argued. “If you’re sharing [a home] into your 30s, children can fit into a lot of things, but there’s a point where you really just need space for them. And you need to have the money to pay for that. And it’s really very difficult.”
She warned many young people are struggling to pay into their pensions, too, once they have met their day-to-day living costs – storing up problems for the future.
“If people aren’t paying into their pensions, in years to come, the taxpayer will be either picking up the pieces or, depending on the colour of the government of the day, not, and you have a lot of pensioner poverty,” she said.
“We’ve got a perfect storm for that generation that’s just been building up. And AI, which has many potential benefits, is going to reshape the workforce. So are we helping young people be equipped for that newly shaped workforce? We need to be looking at that, and we need to be firing some warning shots now.”
The unemployment rate is close to a five-year high, with young people bearing the brunt.
However, Hillier argued that the nation has a clear incentive to help younger workers get on, since they will go on to be the taxpayers bearing the costs of a growing elderly population in years to come.
“You’ve got the demographic timebomb. So they’re going to be supporting the older generation. So we’ve got an interest in investing in these young people.”
A minister in Tony Blair’s Labour government, Hillier has since carved out a formidable reputation on the backbenches, initially as chair of the public affairs committee, and now as chair of the Treasury select committee.
She said she routinely carries in her handbag a pocket summary of the “whole of government accounts” – the most detailed data setting out the nation’s financial health.
Hillier used her expertise to devastating effect when she led the rebellion by backbench Labour MPs against the disability benefit cuts, in last year’s spring statement. But she is scrupulously loyal when asked if the economic morass she has described could tempt younger voters to turn to other parties such as Zack Polanksi’s Greens.
“Anywhere where you have dissatisfaction, people will always look around. But I think actually some of the things that Labour is doing – some of the early-years stuff that we’re seeing, the skills stuff, the youth guarantee, I think are all good things. And it’s early days about how much those penetrate through.”
