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Jayne Bryant, secretary for housing and local government
The Welsh Government remains in the dark about how much Wales will receive to cover the estimated £109m cost of tax rises in the public sector, a committee heard.
Jayne Bryant said the UK Government has confirmed it will provide funding to public-sector employers towards the increased cost of national insurance contributions from April.
But Wales’ local government secretary said ministers expect to receive additional funding in “late spring” and have not yet received confirmation of how much Wales will receive.
Plaid Cymru’s Siân Gwenllian raised concerns about the impact of tax hikes as the Senedd’s local government committee scrutinised Welsh ministers’ 2025/26 spending plans.
Judith Cole, deputy director of council finance policy, said the Welsh Government estimates the cost of the tax hike to the public sector in Wales at £109m.
‘I’d never get out alive’
Ms Gwenllian called for clarity, asking: “So, there’s no, absolutely no talk of the UK Government providing that £109m?
Plaid Cymru MS Siân Gwenllian
“The Welsh Local Government Association was under the impression that this money was going to come and that it was £109m. So, you’re saying today that that is not the picture?”
Ms Cole replied: “No, I would never do that – I would never get out of the building alive … UK Government has said that funding will come to Welsh Government to fund the costs. The discussions are still ongoing about what that actual sum is.”
Ms Bryant added: “All I can say is that once we know we will share that.”
Last month, finance secretary Mark Drakeford confirmed Wales is expected to receive funding via the Barnett formula, which would be based on spending in England.
‘Entirely dependent’
The former First Minister warned this could be “fundamentally unfair”, with English public bodies receiving 100% compensation while funding may not match the need in Wales.
Finance secretary Mark Drakeford
Asked how funding will be divided between councils, Ms Cole said the standard funding formula could be used or it may be based on a proportion of spending as in England.
But she stressed that other factors need to be taken into account because, for example, some councils will provide more services by directly employed staff.
Reg Kilpatrick, director of local government, added: “We’re entirely dependent on the negotiations between the cabinet secretary for finance and the UK treasury.”
Ms Gwenllian warned of the impact of tax hikes on the voluntary sector and outsourced services, piling more pressure on council budgets.
‘Reality’
She said: “I’ve spoken with three councils … but one said that this will cost an additional £2m in terms of internal salaries but £2.5m in terms of the work that is commissioned.
“Another council said £5.4m on the internal, £2.8m on the work that is outsourced – another said £8m internal and £3m on the outsourced work. There is a lot of work commissioned beyond the local authorities themselves and there is no mention of any support.”
The Conservatives’ Peter Fox agreed, raising Wrexham Council’s evidence that about 80% of domiciliary care is commissioned and the public purse will ultimately foot the bill.
Conservative MS Peter Fox
He said: “If national insurance isn’t fully covered for direct employees and those associated businesses, we’re going to end up taking away all of the cash increase that this new budget, this better budget is going to give to service that one element. … that looks like the reality.”
Giving evidence on January 15, Ms Bryant said the UK Government has confirmed it will use the Office for National Statistics definition of a public sector worker.
‘Nothing can be confirmed’
Mr Kilpatrick added that Mark Drakeford, the finance minister, is extremely aware of the issue which forms part of ongoing discussions with the UK treasury.
Labour’s Carolyn Thomas raised concerns about the variability of reserves, which she said range from about £6m to £250m across Wales.
Labour MS Carolyn Thomas
She asked about calls for a funding floor, with provisional increases in funding for the 12 months from April ranging from 2.6% in Monmouthshire to 5.6% in Newport.
Ms Bryant said: “Given the range…, the government is open to considering providing an additional funding floor at the final budget … but nothing can be confirmed at the moment.”
Responding to Plaid Cymru and Conservative calls for an overhaul of the formula used to allocate funding to councils, she said the complex calculation is reviewed every year.
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