Cardiff Council Facing Uncertainty Over National Insurance Contributions
Cardiff Council is currently facing uncertainty over the amount of financial support it will receive for its national insurance contributions, amounting to millions of pounds. With just days until its budget-setting vote, the Council remains unsure of the exact assistance it will receive. In October 2024, the UK Government announced an increase in national insurance from 13.5% to 15% and a decrease in the earnings threshold for employer contributions, impacting both businesses and councils nationwide. The Council is anticipating significant costs for directly-employed staff and commissioned services due to these changes.
While the UK Government has promised financial aid to offset the impact of national insurance adjustments, the exact amount of support remains undisclosed. Cardiff Council has reported that it is expecting assistance covering 85% of its national insurance costs for directly-employed staff in the upcoming fiscal year. Despite this, the overall cost to the Council remains uncertain. During a scrutiny committee meeting, Ian Allwood, Cardiff Council’s Head of Finance, projected a potential £9 million impact on directly-employed staff and an estimated £5 million impact on commissioned services for the following year.
Funds from the UK Government will be channelled through the Welsh Government for distribution to Welsh councils, but the specific allocation method has not been determined yet. The Council has set a goal to bridge a £27.7 million budget gap for the next financial year, proposing measures like a 4.95% council tax increase to achieve necessary savings. Councillor Chris Weaver, Cabinet Member for Finance, highlighted the Council’s inclusion of an 85% support assumption in the budget, ensuring a cushion in case full funding is not provided.
Criticism has arisen regarding the uncertainty surrounding national insurance contributions, with Councillor Calum Davies questioning the Council’s budget assumptions. Plaid Cymru group leader at the Welsh Local Government Association, Councillor Darren Price, expressed concerns over the financial strain the increase in national insurance contributions would place on councils, especially without full funding assurance. The WLGA estimated an additional £109 million cost for local authorities, which could further strain already constrained budgets.
The Council’s Corporate Director of Resources, Chris Lee, emphasised the importance of receiving full funding, acknowledging the inherent risk in assuming 85% coverage. The ongoing lack of clarity from the UK Government regarding forthcoming support has left councils struggling to plan their financial strategies effectively. Urgent communication and transparency are needed to ensure local authorities can navigate these financial challenges successfully. The impact of national insurance changes on Council budgets underscores the pressing need for comprehensive and reliable support mechanisms going forward.
As local authorities like Cardiff Council continue to grapple with financial uncertainties and mounting budget pressures, swift and decisive action at the national level is imperative to provide stability and sustainability to essential public services.