THE PEMBROKESHIRE HERALD has confirmed that Pembrokeshire County Council faces significant budget pressure due to Labour’s hike in employers’ National Insurance contributions (NICs).

The pressures stem not only from the local authority’s obligation to pay increased NICs for its own staff, but also from the added costs passed on by external service providers — particularly in social care — who are also affected by the rise.

SETTING A BUDGET BLIND

When former Cabinet Member for Finance Josh Beynon presented this year’s budget, he flagged the potential risks the NIC increase posed to the Council’s finances in both the current and following financial years. However, at the time, due to the UK Government’s delay in confirming its funding plans, he did not know whether the full NIC increase would be covered.

The Welsh Government has claimed it lobbied Westminster to ensure the full increase would be funded, avoiding in-year pressures on already stretched council budgets.

Instead, a combination of Westminster funding and Welsh Government reserves will cover around 85% of the increase. Whether that support remains in place beyond the current financial year is unclear. Once the first two years of the current spending review period end in April 2027, further funding looks unlikely.

NI RISE WILL HIT COUNCIL SERVICES

Even absorbing a fraction of the cost will have a significant impact on Pembrokeshire’s budget.

We asked the County Council to outline the scale of the impact.

Cllr Alistair Cameron, Cabinet Member for Finance and Efficiency, said: “We have been advised that the UK and Welsh Governments will meet circa 85% of the cost of raising the employer’s National Insurance contribution rate. This leaves Pembrokeshire County Council with an in-year pressure of approximately £0.75m. This will also be a pressure for the 2026–27 budget.

“The Council delivers many of its statutory functions through external organisations (such as social care providers). I understand they are not receiving any compensation for this added expense. This will, therefore, add an estimated £2m to their cost base. I fear they will be looking to the Council to meet the additional costs.

“Pembrokeshire County Council is already working hard to plan for next year’s budget, and we will have to take account of this shortfall, along with other pressures, including UK and Welsh Government funding settlements and rising demand for statutory services such as social care.

“We have made significant cost savings over several years and are trying to run our services as efficiently as possible while responding to public need.

“We will be consulting with the Pembrokeshire public on different budget options, but it will not be easy.

“The final decision on next year’s budget rests with Full Council. We aim to discuss all options with the political groups and non-aligned councillors to try to reach an agreement that best serves the people of Pembrokeshire.”

SOCIAL CARE IN CRISIS

The increase in NIC has already led to warnings that the social care sector in Wales faces a £150 million funding gap.

An increase in employer NICs from 13.8% to 15%, alongside a reduction in the earnings threshold from £9,100 to £5,000, is expected to hit the sector hard.

These changes equate to a 37% rise in NICs for an employee earning £25,000 — equivalent to the Real Living Wage.

Combined with the increase in both the National Minimum Wage and National Living Wage, these changes are set to add tens — or even hundreds — of thousands of pounds in additional annual staffing costs for care homes.

In Pembrokeshire, one major care provider has already reorganised its staff structure and reduced the number of full-time equivalent posts. Smaller providers are also being forced to cut back on where and how often staff work in a bid to control costs.

The Nuffield Trust, an independent think tank, has warned that the Chancellor’s policy decisions could see “swathes of the social care market [collapse] under these extra cost pressures.”

If social care provision fails to keep pace with demand, the resulting pressure on the NHS will inevitably grow. In Pembrokeshire — with one of the oldest populations in Wales — that could prove disastrous.

To maintain care levels and ensure service users’ dignity, Pembrokeshire County Council would be left with two stark choices: cut other services, raise council tax, or most likely, both.

Whether Rachel Reeves has considered that consequence is unclear — particularly in light of the continuing prioritisation of the NHS, which is exempt from the NIC rise, and the lack of investment in the wider system that props it up.