Fears over impact on services of national tax hikeNational Insurance rise next year could cost council hundreds of thousands of pounds
A National Insurance hike could cost Barnet Council more than half-a-million pounds a year because of its impact on local services, councillors have been warned.
Town hall finance chiefs estimate the recently-announced 1.25 percentage point rise in National Insurance rates will push up its annual employer contributions by £600,000.
They said the increase, which is due in April next year, is supposed to be “net neutral for the public sector” – meaning the council may get funding for it – and that it is “very likely we will see this cost come back to us indirectly via the supply chain”.
But with full details of the funding plans yet to be revealed, councillors sought reassurances that schools and social care provision would be protected from the extra costs. The debate came during a meeting of the policy and resources committee on Thursday, 30th September, where Labour’s Alison Moore asked for a report setting out the impact on council services and contractors.
Speaking during the meeting, Cllr Moore said: “The area we are particularly concerned about [...] is adult social care. We already have a fragile care market, whether it’s residential or social care. Both came under increasing pressure, and the pandemic worsened the situation.
“Providers have ceased trading. So we have concerns about that market, and that many providers may find it difficult.”
Cllr Moore said that during the first year the money raised from the National Insurance rise would go directly to the NHS, so it will not be until at least 2023 that extra cash will start coming through to social care.
She called for a risk assessment and a plan to mitigate the impact on the care market, adding that higher costs must not lead to a “diminution of service”.
David Longstaff, Conservative chair of the children, education and safeguarding committee, said the dedicated schools grant - a pot of money given to councils by the government to support council-maintained schools - would be adjusted to cover the increased costs to schools.
Sachin Rajput, chair of the adults and safeguarding committee, suggested council officers would already be looking into the impact on budgets.
Council leader Dan Thomas told Cllr Moore the potential impact on services would be dealt with as part of business planning, which is due to be discussed by the committee in December. He added that London council leaders had made the case to the government that there should be no “knock-on effect” caused by the National Insurance hike.
Labour’s Ross Houston revealed that the school where he serves as a governor was “looking at this [the National Insurance rise] having a knock-on effect on potential staff numbers” and said he would “welcome anything that could be done to pressurise government to pass on funding to cover this”.
The response Labour received from council officers on the cost of the National Insurance rise, which they revealed prior to the meeting, was: “£600k estimated - it is supposed to be net neutral for [the] public sector, i.e. we may get funding for it.
"It is very likely we will see this cost come back to us indirectly via the supply chain – even if contracts aren’t up for renewal (for sustainability reasons) and it’s difficult to predict a cost for this at the moment.”