Labour’s national insurance hike will cost Scottish councils £265 million, according to reports. Local authority body Cosla has said that councils already face a shortfall of £392m outwith the NI rise.
The Herald reported that Cosla has asked the SNP Government to provide extra funding to cover the full cost of the hike. Cosla gave the figure as it launched its campaign urging the Scottish Government to “Invest Locally in Scotland’s Future” ahead of its budget on December 4.
The document said: “The changes to employers’ national insurance contributions is estimated to introduce a direct cost of at least £265m for local government, before additional costs for commissioned services in the third and independent sector are taken into account. Scottish Government must commit to passing on the promised consequentials,” said the document.
“Accounts Commission analysis shows a budget gap of £392m in 2025/26 even before the additional pressure of the national insurance contribution changes.”
Labour Chancellor Rachel Reeves announced that employer national insurance contributions will go up from 13.8 per cent to 15 per cent. The threshold at which companies begin paying contributions has also been lowered from £9,100 to £5,000.
Cosla President Councillor Shona Morrison told The Herald councils had suffered “real-terms” financial cuts by the Scottish Government: “Councils are at the heart of our communities, providing the vital services we all use at some point over the course of a normal day – from ensuring the best possible education for our children to providing good quality affordable housing and to making sure our communities and public spaces are clean and safe,” she said.
“In turn, these services benefit us all by improving our health and wellbeing, strengthening our communities, and supporting us in reaching a just transition to net zero.
“However, the great work performed everyday by our councils is increasingly at risk. Years of real-terms cuts and flat cash settlements from Scottish Government, compounded by rising inflation and operational costs mean that our councils are constantly required to do more with less.
“Our councils have done their very best to protect core statutory services, such as education and social care. However, as we can see with the ever-increasing number of housing emergencies announced across our communities, even these essential services are facing real strain.”
A UK Government spokesperson said: “We have taken tough decisions to fix the foundations of the UK economy while protecting the smallest employers across Scotland by more than doubling the Employment Allowance to £10,500 – meaning more than half of them with NICs liabilities either gain or see no change next year.
“The Scottish Government will receive additional funding on top of its record £47.7 billion settlement announced at Budget to support them with the costs associated with changes to Employer National Insurance Contributions. More details will be set out in due course.”
A Scottish Government spokesperson said: “We continue to assess the full implications of the Chancellor’s Autumn Budget statement. Finance Secretary Shona Robison will be announcing further details as part of the Scottish Budget on 4 December.
“We recognise the crucial role councils play in their communities. That is why we are making available record funding of more than £14 billion to councils in 2024-25 and our commitment to meaningful budget engagement with Cosla will continue ahead of the Scottish Budget.”
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