Welsh Government announces extra funding to close higher National Insurance costs gap

Welsh public services will get extra money to help meet higher National Insurance costs, as a result of the increase in employer National Insurance Contributions (NICs) announced in the UK Government’s Autumn Budget last year.

Chancellor Rachel Reeves raised the rate from 13.8% to 15%, from 6 April this year.

The level at which employers start paying NICs (the secondary threshold) has also been reduced from £9,100 to £5,000 per year.

These changes have added an extra cost of £257m to the Welsh public sector each year.

The UK Government have provided £185m via the Barnett formula, rather than meeting the actual costs to the Welsh public sector, laving a shortfall of £72m. The Welsh Government is providing an extra £36m to help fund the gap.

The total funding package is £220m, covering about 85% of increased costs for Welsh public services.

Shortfall

Finance Secretary Mark Drakeford said: “We’re protecting our vital public services by using £36m from our reserves to help address the National Insurance shortfall left by UK Government.

“The UK Government did provide funding, but this falls short of the actual costs faced by Welsh public services, creating a multi-million-pound gap every year.

“We have stepped in to help as much as we can, but the Welsh Government cannot afford to cover the entire shortfall.

“The UK Government should treat the public sector the same across the UK and make good on its pledge to fully fund these extra costs.”

‘Labour failings’

Plaid Cymru spokesperson for Finance, Culture and the Welsh Language, Heledd Fychan MS said: “The fact that we are being short changed to the tune of £70m due to the UK Government’s National Insurance Contributions hike is just the latest example of Labour failing Wales.

“Meanwhile, the Labour Welsh Government who promised we would be led to the land of milk and honey with two Labour administrations are being nothing more than bystanders to unfairness.

“When he should be beating a path to the Chancellor’s door, the Cabinet Secretary for Finance Mark Drakeford has instead raided the Welsh reserves without a hint of criticism of his London counterparts.

“Whilst the unfair Barnett Formula remains in place, Wales will never be fairly funded. Labour have done absolutely nothing to redress this historical injustice, providing further proof that only a Plaid Cymru Government will demand action by Westminster and ensure that the UK Prime Minister – whether Labour or Tory – cannot ignore Wales’s voice.”

Welsh Conservative Shadow Cabinet Secretary for Finance, Sam Rowlands MS, said: “Before the general election Labour promised that two governments working at either side of the M4 would deliver for Wales. Instead, we see a party at war with itself, with a Welsh Labour Government seemingly powerless to influence their UK counterparts.

“If Labour hadn’t squandered hundreds of millions of pounds on vanity projects and inefficiencies, this funding gap would not pose such a substantial challenge. They must also explain how they will address other financial pressures later in the year after depleting reserves to plug this shortfall.

“This situation lays bare the UK Labour Government’s disregard for Wales and Welsh Labour’s ongoing failure to competently manage its own budget.”

‘Disastrous’

Welsh Liberal Democrat Leader Jane Dodds MS said:“The Welsh Lib Dems have opposed this disastrous jobs tax from day one. Not only is it hammering our small businesses with unemployment in Wales rising, but it is now clear it will leave Wales with a gaping hole in its public finances and our public services worse off.

“The fact that the First Minister cannot even convince the UK government that the increased cost to the public sector should be covered by the Treasury shows how little influence Welsh Labour have in London.

“The Liberal Democrats will continue to argue for a reversal of the national insurance hike and fair funding for Wales.