£5bn from Youth Mobility Scheme would give Government “nowhere to hide” on winter fuel payment, say Lib Dems

EMBARGO: IMMEDIATE RELEASE

The Centre for European Reform claims that a Youth Mobility Scheme could add 0.45% to GDP over the long-term. New House of Commons Library analysis commissioned by the Liberal Democrats suggests that such growth could add roughly £5 billion to exchequer revenues a year.

The House of Commons Library has estimated that if GDP was 0.45% higher this could mean an additional tax revenue of around £5 billion a year in the long-run. The 0.45% figure was arrived at by a Centre for European Reform study on the economic impact of a Youth Mobility Scheme between the UK and EU.

The party says this additional revenue could be used to reverse unfair political decisions made by Labour since they came into office, for example the changes to eligibility for winter fuel payments, saying “it would be a political choice” to do otherwise. The Treasury estimated that the cut to the payment would save around £1.5 billion a year.

The Liberal Democrats have been calling on the Government to introduce a capped youth mobility scheme with the European Union for months, saying that Labour “dragging its heels” on this essential scheme to extend the opportunity for young Brits to work abroad in Europe.

Talks have stalled multiple times, with reports now suggesting Starmer will aim to finally agree a scheme tomorrow. But Liberal Democrat Europe Spokesperson James MacCleary has labelled Starmer the “boy who cried wolf” when it comes to youth mobility.

The Liberal Democrats are pushing for youth mobility to top Starmer’s priority list in Monday’s talks, and argue that the revenue generated by such a scheme should be used to reverse fiscal decisions such as the winter fuel payment.

James MacCleary MP, Liberal Democrat Europe Spokesperson, said:

“We’ve been hounding the Government for months to sort out a capped youth mobility scheme – but they’ve been dragging their heels when it comes to properly negotiating on the issue.

“We’re once again hearing positive noises from Downing Street about youth mobility agreements tomorrow. However, the Prime Minister is beginning to look like the boy who cried wolf when it comes to this crucial scheme.

“A capped youth mobility scheme would give the Government nowhere to hide when it comes to decisions like the winter fuel cuts. It would bring benefits to both younger and older generations - opening opportunities for young people to live and study abroad while using the revenue the scheme attracts to revert on unfair decisions like the winter fuel cut. To ignore it would be a political choice.”

ENDS

Notes to Editor:

• The Centre for European Reform estimates that a youth mobility scheme could boost GDP by 0.45% in the long-term.

The Library has responded to a request by providing rough figures based on some broad assumptions. They are clear this is a rule of thumb. To produce a more robust estimate the Library would need further information about the composition of the growth in GDP and how other economic variables, such as inflation, are affected.

The £5 billion per year is not an estimate of the additional revenues that would be generated from deep alignment on goods and services with the EU. It is a rough estimate of the additional revenues from an economy that is 0.45% larger. To make a better specific estimate of the additional revenues generated from deep alignment on goods and services the Library are clear they  would need more information on the components of the additional growth.

In order to carry out the calculation, the Library has assumed that nominal GDP (which is important for tax revenues) increases by the same rate as the real GDP growth estimates produced by Best for Britain. The Library also assumes that the tax-to-GDP ratio doesn’t change.

Therefore, the Library is assuming that tax revenues increase by the same % as nominal GDP AND that this will increase by the same % as the real GDP estimate of the organisation. Following this approach:

• The Library estimates that annual tax revenues would be around £5 billion higher (in 2025/26 prices) if real GDP was 0.45% higher

This provides a reasonable approximation of the scale of benefits but these estimates are only indicative and should be considered a rule of thumb. In reality, the amount of tax generated by higher GDP growth would depend on the composition of the growth. The composition of GDP is important because some components of GDP are more ‘tax rich’ than others, as the Office for Budget Responsibility (OBR) explains.

The data used to produce these estimates are from the OBR’s Public finances databank – April 2025.

Please see Treasury estimates of the savings from winter fuel payment changes here.