Council still in the dark over NI support

Ted Peskett, local democracy reporter

Cardiff Council still doesn’t know how much help it will get for national insurance costs worth millions of pounds just days away from its budget-setting vote.

The UK Government announced in October 2024 that national insurance would be going up from 13.5% to 15% and there would be a reduction in the earnings threshold which requires employers to start paying contributions.

As well as affecting businesses, the change will affect councils across the country both in terms of directly-employed staff and through the cost of commissioned services.

Financial support

The UK Government will provide financial support to councils for the impact of national insurance changes, but it isn’t yet known how much help will be given.

In a report on its budget proposals for 2025-26, Cardiff Council said it is preparing to receive financial support which would cover 85% of the national insurance costs it faces for directly-employed staff.

The overall cost to the council is also something which it isn’t certain on yet.

Cardiff Council’s head of finance, Ian Allwood, told scrutiny committee members at the council this week that the likely national insurance impact in terms of directly-employed staff for 2025-26 will be about £9m.

The council official added the impact on commissioned services is more difficult to predict and is anticipated to cost about £5m.

Support from the UK Government will go to the Welsh Government for it to then distribute to Welsh councils. It also isn’t known yet how that money will be distributed.

Assumption

Conservative councillor at Cardiff Council, Cllr Calum Davies, questioned why the council went with an assumption of 85% in its budget.

At a Cardiff Council children and young people scrutiny committee meeting on Monday, February 24, he asked: “Is that a conservative estimate that you hope then gives you a bit of a cushion?

“What happens if it is not conservative enough and it turns out to be 80%? What’s the forward impact then on this budget?”

Cardiff Council will have to close a budget gap of £27.7m next year. It has put forward a number of proposals, including a 4.95% council tax increase, to help achieve those savings.

The council’s cabinet member for finance, Cllr Chris Weaver, said: “I don’t think there is an… absolute rationale for it in the sense of there is no reason to expect it will be 85%.”

He went on to add it has been included as a “large enough quantum to give you that cushion in case it isn’t 100% funded.

“If it [is] lower, clearly it has an impact. It depends how much lower – 5% would be roughly… £500,000.”

Cardiff Council’s corporate director of resources, Chris Lee, said: “Obviously we would want to receive 100%, but I think it was worth flagging the risk around it.”

Plaid Cymru group leader at the Welsh Local Government Association (WLGA), Cllr Darren Price, called the increase in national insurance contributions a “huge cause of concern”.

In WLGA’s announcement following news from the Welsh Government on how much funding councils will receive for their budgets, Cllr Price said: “The WLGA has estimated that the cost to local authorities stands at £109m, and this cost will not be fully met.

“That represents yet another cost pressure to councils’ already squeezed budgets.

“The average 4.3% increase for councils announced for next year clearly falls short of meeting the pressure on council budgets.

“We need urgent clarity from the UK Government of any forthcoming support so that councils can plan their finances.”