Drakeford confirms public sector shielded from tax hike

Chris Haines ICNN Senedd reporter

Mark Drakeford confirmed the UK Treasury will cover increased costs of national insurance in the public sector amid concerns additional funding could be “swallowed up” by tax rises.

The former first minister said Wales will receive full funding for employer national insurance (NI) contributions for public sector workers, as defined by the Office for National Statistics.

He told the Senedd this will be “above and beyond” an additional £1.7bn announced for Wales last week in Labour’s first UK budget in 15 years.

Prof Drakeford, Wales’ finance secretary, who will announce the Welsh Government’s own spending plans in December, described the UK settlement as a step change.

But he stressed: “It was never going to be possible to repair 14 years’ worth of damage within the first 14 weeks of a UK Labour Government.”

‘Different world’

Prof Drakeford explained the Welsh Government will receive £235m in 2025/26 for capital investment in areas such as repairing schools or building hospitals.

In a statement to the Senedd on November 5, he said: “That is a real-terms 7% increase in a single year. That compares with 0.5% a year on average over the last 14 years.

“In 14 years of the last Conservative government, the annual uplift in capital available to the Welsh Government accumulated to the uplift we have now received in a single year.”

He contrasted this with an extra £1m in capital spending provided by Jeremy Hunt, the former Tory chancellor, in March, stating Wales now is 235 times better off.

He said: “That additional capital will not fill every hole nor undo all the damage inflicted on the fabric of our public services but it is a different world to the one we had learned to fear.”

‘Fiscal fiddling’

Peter Fox, the Conservatives’ shadow finance secretary, criticised the “snatch-and-grab” budget, accusing Labour of misleading the public and breaking manifesto promises.

He told the debating chamber or Siambr: “Despite all the spin, this is the same old Labour: borrowing more, taxing more – taking more of other people’s money.”

Mr Fox said the £40bn in tax rises, which includes employers’ NI contributions, will suppress economic growth and wages, costing jobs and impacting thousands of working people.

Accusing Rachel Reeves of “fiscal fiddling”, he warned the chancellor is playing a dangerous game that risks saddling generations with debt by maxing out the country’s credit card today.

His Conservative colleague James Evans raised concerns about care homes and GP surgeries, which, unlike the health service, will not be protected from the NI hike.

‘Deaf ears’

Heledd Fychan suggested calls for HS2 funding, devolution of the Crown Estate and replacement of the Barnett formula had fallen on deaf ears.

Prof Drakeford said Welsh ministers would continue to make the case for rail funding and reform of the formula that is used to allocate money to Wales.

But he stressed it is unrealistic to expect fundamental change in six months, with the Barnett formula dating to 1978 and reform requiring agreement across all four nations.

Ms Fychan, Plaid Cymru’s shadow finance secretary, told the Senedd that cruel and damaging policies of the previous Tory UK Government are continuing under Labour.

Her party colleague Sioned Williams was disappointed the UK’s first female chancellor did not mention childcare in her speech given its importance to tackling inequality.