National Insurance hike could cost council £500,000

The rise could cost Reading Borough Council more than £500,000

An increase in the amount of National Insurance paid by employers could cost a local authority more than £500,000.

Reading Borough Council's increased contributions for its employees will be paid by the government.

However, more than half-a-million pounds of costs could be incurred by the council's use of contractors to provide some services.

Employers National Insurance contributions are set to rise to 15% in April 2025.

The plan was announced by the chancellor Rachel Reeves in her budget earlier this year - the first delivered by a Labour politician for 14 years.

Costs incurred by local authorities, including Labour-run Reading Borough Council, will be covered by Westminster.

For Reading, that would mean roughly £1.8m of additional spending being covered.

While the council as an employer will have its raise paid for by the government, that will not apply to its children's service company Brighter Futures for Children (BFfC), contractors, or care and education providers.

Council leader Liz Terry told a recent meeting: "The current estimated additional cost of these changes for 2025/26 for BFfC is therefore £517,000."

"The council does intend to lobby the government on this matter as the company was set up under a government direction and therefore our view is that the council should not now be financially penalised as a result," she added.

The final cost implication on the council is estimated to be higher than £517,00, but no definitive estimate has been provided yet.

At the same meeting Terry was asked what impact the proposed increase in the minimum wage to £10 per hour and the introduction of the national living wage of £12.21 per hour would have.

She was unable to provide an answer as calculations for the 2025/26 year had not yet been finalised.