Council unsure who will fund millions in extra National Insurance contributions

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Local authorities face ongoing uncertainty over who will fund increases to National Insurance contributions, councillors in Newport have heard.

The UK Government announced last year that employers will have to pay more National Insurance on their workers’ earnings.

In Newport, a council report warns this will “materially increase” the local authority’s staffing costs by around £4.5 million.

Newport’s draft budget for 2025/26 “assumes” this cost will be funded in full, yet councils – and the Welsh Government – are still waiting to find out how much the Treasury will bankroll these increases.

Members of a Newport City Council scrutiny management committee met on Thursday to discuss the budget proposals with senior officers.

Cllr John Harris asked whether the draft budget would be affected if the funding for higher National Insurance contributions turned out to be less than was assumed.

Meirion Rushworth, the council’s head of finance, said there was an understanding the money would be “forthcoming”, but a final confirmation of the sums involved wasn’t anticipated “until the spring or summer”.

He added there was “no guarantee we are going to get all of it”, and warned there was a “reasonable risk at this point” that any central government money towards the council’s workers’ National Insurance contributions “may not be enough”.

“It could put us in an awful position if they say ‘we’re not giving you all of it,’” Cllr Matthew Evans told the meeting.

Cllr Stephen Cocks asked what the impact would be on the council’s budget, if there was a funding shortfall for National Insurance.

Mr Rushworth said that would lead to “an in-year overspend and we will need to rectify that in the budget next year”.

He added: “It’s outside of our control and it’s not something that we are able to absorb.”

The uncertainty in the council mirrors that in the Senedd, where this week finance secretary Mark Drakeford said the Welsh and UK governments “continue to be in dialogue” on the matter.

“They [in the UK Government] are working on the funding that will be provided to mitigate the impact of the increase in national insurance in the public sector,” he added. “So, we will receive support from the government in Westminster – the debate is how that support will be provided to us, and we are still negotiating that with them.”

Mr Drakeford also reiterated his belief “that if the help for public services is distributed through the Barnett formula, rather than actual expenditure being reimbursed, that would not be in the interests of Wales”.

His comments follow a recent Senedd committee meeting, in which local government secretary Jayne Bryant said Welsh ministers expect to receive additional funding towards National Insurance in “late spring”, but were unsure how much money the Treasury would provide.