Portuguese Tax Breaks for Young Offer Genuine Way to Level Up

Jonathan Edwards

The overriding social and economic challenge facing the communities of large parts of our country is the brain drain of our young people forced to move away to find better employment opportunities.

It is a challenge that has exercised policy makers for decades. As young people move, the population ages – a phenomenon exacerbated often as retirees move in.

This is particularly evident in rural Wales and coastal Wales, which are understandable magnets for those from other parts of the UK who wish to enjoy the latter years of their life in a place of scenic beauty – if they can cope with the rain!!

Spending half my life in London and the rest in west Wales gave me an acute feel for this dynamic. Well into my forties, I was an old man in central London surrounded by people far younger than myself. At home in the Amman Valley, I felt a far younger person.

Imbalance

This imbalance has grave economic consequences and these matters are well recorded. For my entire time in Parliament geographical economic rebalancing was a constant theme in Westminster economic discourse and something that exercised my mind for years.

Politically it reached its zenith with Boris Johnson and his call to Level Up the UK, which I believe was equally as powerful as the ‘Get Brexit Done’ narrative when it comes to explaining the December 2019 general election landslide won by the Tories.

The problem of course is that there wasn’t any substance to the slogan and getting Brexit done meant an end to European economic support for the poorest communities in the UK. This particularly hit the West Wales and the Valleys region, which hasn’t come close to being made up by the UK Government to date.

As an MP I would often use the example of German reunification as the sort of ongoing commitment needed to address the economic inequalities in the UK. Compared to what the Germans have deployed there is no such serious policy by any political party here. I have even argued in the past that the situation is so serious in the UK that all parties should commit to a set of measures for decades in advance, as they did in Germany, and take the politics out of regional economic policy.

Natural assets

I would also often talk about the need to maximise the abundance of natural assets we had in Wales to put in place a package to entice young people. Going back to my dual life as a citizen of London and Carmarthenshire, whilst the big city had an incredible social scene of bars, restaurants and cafes it couldn’t rival the abundance of opportunities back home in terms of leisure activities.

Within minutes of closing my laptop at home, if I had spare time, I could be out on the open road on my bike, walking up a mountain in the Bannau, taking in the sea air, or losing golf balls as if they were going out of fashion. People can work in the modern economy as long as there is an adequate internet connection and with work and leisure time increasingly compressed, we have a great offer in Wales for those who have a passion for outdoor pursuits.

One thing clear to me is that we cannot geographically rebalance if we have a general trend where young people leave our poorest communities. We need the innovation, drive and energy of young people to shape the future. From a Welsh perspective, as the Welsh Government over the years becomes more fiscally autonomous we will need the tax base to be able to fund our public services, and that means keeping our young people.

The Arfor programme

To be fair to the Welsh Government and their then agreement with Plaid Cymru, the Arfor programme, recognised stemming the drain of young people as mission critical if it was to save the Welsh language in its heartland areas. It is offering £,5000 for young families to return to the counties of Gwynedd, Ceredigion and Carmarthenshire.

The Portuguese government has gone a step further and slashed taxes for people aged 35 and under in an effort to stop the out-migration of their youth (some 30% of Portuguese aged 15-39 have left) and encourage young people from other countries to move in. Under the plans announced in this month’s Budget, under 35s will pay no tax at all on earnings up to 28k Euros in the first year before income tax increases progressively over 10 years. Over 35s earning the same amount of money will pay the normal Portuguese income tax rate of 37%.

Budget

If Chancellor Rachel Reeves is looking for a big idea for her Budget later this month, why not introduce a similar policy for the poorest parts of the UK as part of a programme of investment to geographically rebalance the UK? Labour’s first of five missions is to secure the highest sustained growth in the G7. It could throw everything at London and the South East and hope it drags the rest of the UK along; however, even if successful that would fuel the forces that populism has already exploited of an ever-increasing geographically imbalanced economy.

Or it could give the poorer economic performing areas of the UK a hand up, and surely a key part of that is ensuring these areas keep and entice young people to build their futures there.

Jonathan Edwards was the MP for Carmarthen East and Dinefwr from 2010 to 2024