**Mark Drakeford Criticizes UK Government’s Decision Leading to £65m Loss for Wales**
Wales’ finance secretary, Mark Drakeford, has denounced the UK Government’s recent decision, which he believes will leave Wales short of £65 million. The issue stems from a significant alteration made by Chancellor Rachel Reeves in last year’s Budget, affecting employer National Insurance contributions. As of this month, the rate of employer’s NI contributions has risen to 15%, with the earnings threshold for payment decreasing from £175 to £96. Various businesses, charities, and councils in Wales had expressed concerns about the potential impact of these changes.
Drakeford highlighted that the chancellor had assured Wales of financial assistance to cover public sector employer contributions resulting from these changes. However, he revealed in the Senedd chamber that Wales would not receive the full amount needed to offset the actual costs. Instead, the distribution of funds would be based on the Barnett formula, which aims to maintain equivalent spending power across the UK. The Welsh Government estimated that public sector employers in Wales could face an additional £253 million in expenses due to the NI alterations.
Expressing his disapproval, Drakeford stated, “The UK Government’s decision to allocate funding through the Barnett formula means that Wales may be deprived of up to £65 million required to cover the actual costs incurred by Welsh public services.” He emphasised that the principle outlined in a UK Government document suggests that costs generated by decisions should be met by the responsible body, which, in this case, would be the UK Government in relation to the NI changes.
Drakeford stressed that the shortfall could have detrimental effects on public sector services in Wales, and he affirmed that the Welsh Government would engage in discussions with the Treasury to address this issue. He clarified that using Welsh Government funds to compensate for the shortfall would necessitate diverting resources from essential areas, a trade-off that he deemed unsustainable. Plaid Cymru MS Heledd Fychan inquired about the potential implications of the £65 million shortfall on public and third sector entities, prompting Drakeford to emphasize the need for the UK Government to reassess its approach and consider funding the actual impact of its decisions in devolved administrations.
Drakeford criticised the UK Government’s decision-making process, stating that Treasury Ministers had overlooked the option to fund the specific effects in devolved regions, opting instead to rely on the Barnett formula. He reiterated the Welsh Government’s commitment to challenging this decision and seeking a resolution that accurately reflects the financial needs of Wales. The ongoing discussions between the Welsh Government and the Treasury aim to secure adequate funding to mitigate the adverse consequences of the NI contribution changes.
In the face of this financial challenge, Drakeford’s stance underscores the importance of fair allocation of resources and the accountability of decision-makers in addressing the implications of policy changes. As the dialogue continues between Wales and the UK Government, the focus remains on advocating for equitable funding that safeguards the sustainability of public services and upholds the commitments made to Welsh communities.