Wales' public services face £36m shortfall after National Insurance hikes

ITV News

a day ago

The Welsh Government says it won't get enough money from the UK Government to offset all of the impact of higher National Insurance costs for public services.
Ministers say there'll be a £36m shortfall even after they've raided reserves.
The UK Government says it's 'boosted' the Welsh Government's spending power by lifting limits on use of reserves on top of 'a record £21bn' budget.
Employers have been paying more National Insurance Contributions (NICs) since April after the Chancellor announced the increase in her budget last October.
The UK Government had said it would ensure funding for the Welsh Government to cover the cost of the increase for public sector organisations such as hospitals, local authorities and schools.
Welsh Ministers have been concerned about the method the UK Treasury is using to calculate that amount.
It relies on the Barnett Formula - a method used to work out how much funding Wales should get based on spending in England.
But because the public sector is bigger here in Wales than across the border, Welsh ministers argued that using the formula in this instance would leave Wales shortchanged.
Now the Welsh Government says it's had final confirmation of the figures. It says that the increase in NICS will cost the public sector here in Wales an extra £257m.
The UK Government is providing £185m, leaving a shortfall of £72m.
The Welsh Government says it will find half of that amount, £36m, from its own reserves. But it says that still leaves a gap of £36m.
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."
A UK Government source said: "The Welsh Government's spending power has been boosted by the UK Government's decision to waive their reserve draw down limits for 2025-26.
"This increased spending power came on top of more than £180m extra to compensate for public sector national insurance contributions, and a record £21bn financial settlement at the Autumn Budget, the largest in the history of devolution.
"UK Government did this to help the Welsh Government invest in public services and drive down NHS waiting lists. Together, we are delivering our Plan for Change in Wales by fixing our NHS, creating thousands of well paid jobs, boosting the minimum wage, and investing billions in our high streets and public services."
It's another source of tension between the Labour Welsh Government and the Labour UK Government. Earlier this week the First Minister called for the two-child benefit cap to be scrapped.
Eluned Morgan told ITV Wales: ''We are really concerned about levels of child poverty in Wales and we have called on the UK Government to lift the two tier child benefit cap.
"We think this should be considered in future budgets and we have made that case to the Prime Minister as I did last week in London."
Ahead of that meeting, Eluned Morgan told ITV Wales that Keir Starmer should 'start coughing up' to make up for areas where Wales has been shortchanged.
She added: "I'll obviously be taking that opportunity to really push the case for those things that I outlined in my Red Welsh Way speech, making sure that we get a fairer deal on things like the railways and coal tips and other issues that are absolutely top of my agenda, where we think we've been hard done by in the past and we want them to make up for it."
Is a cash boost for railways coming down the tracks?
There have been reports today that there will be significant extra funding for at least one of those demands: railways.
The Chancellor Rachel Reeves will set out long-term spending plans in her Spending Review on June 11th.
The Politico website says it's been told that the plans will include capital funding for Wales which is aimed at improving rail infrastructure.
UK Government sources have dismissed the report as 'speculation' but say that rail spending in Wales is a top priority for the UK Government as has been repeatedly highlighted by the Welsh Secretary Jo Stevens.