In a bid to alleviate the financial pressure caused by a significant increase in employers’ National Insurance contributions, the Scottish Government has allocated an additional £144 million to local authorities. This funding is intended to cover approximately 60% of the costs incurred by the public sector due to the rise in National Insurance rates, a move welcomed by councils but criticized by opposition parties.
£144 Million Funding Boost
Finance Secretary Shona Robison announced the funds during a parliamentary session, explaining that the support would offset a large portion of the £265 million estimated cost to local authorities due to the UK’s hike in National Insurance contributions. The move has been seen as a direct response to the UK Government’s planned increase in employer National Insurance rates, from 13.8% to 15%, and a reduction in the threshold at which employers must start paying from £9,100 to £5,000.
This funding boost is intended to prevent local councils from passing the full financial burden onto residents through steep council tax hikes. Robison highlighted that the extra money for local authorities would effectively be equivalent to a 5% increase in council tax, offering a balance between fiscal responsibility and the need to protect vulnerable households from inflation-busting rises in council charges.
Concerns Over Financial Strain
While the Scottish Government’s intervention has been appreciated, concerns remain about the overall financial strain on local councils. The UK-wide National Insurance rise, scheduled for April, will put a considerable burden on local authorities already grappling with tight budgets. Some councils had warned of double-digit council tax increases, exacerbating the cost-of-living crisis.
Local government body Cosla had previously raised alarms about the scale of the financial challenges, and Robison’s intervention is seen as a much-needed lifeline. However, the funding falls short of fully covering the increased costs, leaving some councils concerned about how they will manage the shortfall.
The Bigger Picture: Budget and Public Sector Costs
Robison’s announcement comes as the Scottish Government’s Budget for 2025-26 passed its first parliamentary vote. The Budget has been designed to address pressing issues across public services, including an estimated £750 million required to cover increased public sector wage costs linked to National Insurance hikes.
While the Scottish Government has committed to providing a record £47.7 billion budget, concerns remain about the adequacy of funding for public services and the pressure on local authorities to balance their budgets without overburdening residents. Robison also criticized the UK Government’s proposed compensation for Scotland, which she described as “unacceptable,” asserting that it falls short of covering Scotland’s actual needs.
Political Reactions: Tensions and Criticism
The funding boost for councils has sparked varied reactions in the Scottish Parliament. Scottish Conservative finance spokesperson Craig Hoy took aim at the broader “failed cosy socialist consensus” he claims dominates Holyrood, accusing the SNP-led administration of high-tax policies that stifle growth.
Scottish Labour, while not outright opposing the Budget, described it as “nowhere near good enough,” calling for improved frontline services. Scottish Green finance spokesman Ross Greer, however, highlighted his party’s influence on the budget, praising the Greens’ achievements and contrasting their approach to Labour’s lack of ambition in negotiating for the public.
Liberal Democrat leader Alex Cole-Hamilton expressed his party’s willingness to act responsibly and seek common ground but stopped short of offering full support for the SNP’s budget.
Future Prospects and Next Steps
The Scottish Government is now moving toward the final stages of the Budget’s passage through parliament, with expected debates and scrutiny. As local councils begin to prepare for the April National Insurance hike, all eyes will be on how the additional funding is allocated and whether it will be enough to prevent significant financial strain on both councils and households.
