NI hike leaves £36 million hole in Wales' budget - Drakeford

Last year, the UK government increased the amount employers have to pay in National Insurance (NI) with the Welsh government, which employs tens of thousands of public sector workers, left with a £257m bill.

The Finance Minister Mark Drakeford said he had added £36m from Welsh government reserves while the Treasury provided £185m to help plug the gap. 

However, it still leaves £36m to find, which could come from cuts to other services, as Drakeford said the 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," he added. 

The row is the latest dispute between the Labour administrations in Cardiff and London ahead of next year's Senedd elections.

First Minister Eluned Morgan said earlier this month she would "not stay silent" if Sir Keir Starmer's government takes decisions "we think will harm Welsh communities".

Opposition parties have slammed the situation.

Welsh Liberal Democrat Leader Jane Dodds MS said: “The Welsh Lib Dems have opposed this disastrous jobs tax from day one. Not only is it hammering our small businesses with unemployment in Wales rising, but it is now clear it will leave Wales with a gaping hole in its public finances and our public services worse off.

“The fact that the First Minister cannot even convince the UK government that the increased cost to the public sector should be covered by the Treasury shows how little influence Welsh Labour have in London.

“The Liberal Democrats will continue to argue for a reversal of the national insurance hike and fair funding for Wales.”

Welsh Conservative Shadow Cabinet Secretary for Finance, Sam Rowlands MS, said: “Before the general election Labour promised that two governments working at either side of the M4 would deliver for Wales. Instead, we see a party at war with itself, with a Welsh Labour Government seemingly powerless to influence their UK counterparts.

“If Labour hadn’t squandered hundreds of millions of pounds on vanity projects and inefficiencies, this funding gap would not pose such a substantial challenge. They must also explain how they will address other financial pressures later in the year after depleting reserves to plug this shortfall.

“This situation lays bare the UK Labour Government’s disregard for Wales and Welsh Labour’s ongoing failure to competently manage its own budget.”

Plaid Cymru spokesperson for Finance, Heledd Fychan MS hit out at the Welsh and UK Labour Governments for allowing Wales to be short-changed to the tune of £70 million as a result of the increase in National Insurance Contributions.

She said: “Meanwhile, the Labour Welsh Government who promised we would be led to the land of milk and honey with two Labour administrations are being nothing more than bystanders to unfairness.

“When he should be beating a path to the Chancellor’s door, the Cabinet Secretary for Finance Mark Drakeford has instead raided the Welsh reserves without a hint of criticism of his London counterparts.

“Whilst the unfair Barnett Formula remains in place, Wales will never be fairly funded.”