Perth and Kinross Council has been hit with an estimated additional cost of £5.4 million due to changes in National Insurance (NI) contributions. Starting from April 1, 2025, the threshold for employers’ NI contributions will be lowered from £9,100 per year to £5,000, while the rate will increase from 13.8% to 15%. These changes are expected to generate over £25 billion, with the UK Government allocating an extra £3.4 billion to Scotland through the Barnett formula to help cover the additional expenses.
Following the UK budget announcement, Perth and Kinross Council conducted an assessment to determine the financial implications of the NI adjustments. A spokesperson for the council informed the Local Democracy Reporting Service that the estimated increase in NI costs for the council amounts to £5.4 million. During a recent meeting of the council’s Scrutiny and Performance Committee, it was highlighted that the changes could result in a combined extra cost of £339,000 for the council’s three arm’s length external organisations, including Culture Perth and Kinross, Live Active Leisure, and Perth Theatre and Concert Hall.
Culture Perth and Kinross’ chief executive, Helen Smout, expressed concerns about the impact of these changes, stating that the additional costs feel significant, especially considering that a large portion of their expenses go towards staff salaries. Christopher Glasgow, the chief executive of Perth Theatre and Concert Hall, also raised concerns about the unplanned additional costs they would be facing. Live Active Leisure anticipates a substantial six-figure increase in expenses come April.
Councillor Ian Massie, who raised the issue during the committee meeting, voiced worries about the repercussions of the increased employer’s NI contributions on cultural and sports trusts, already facing financial pressures. The UK Government assured that the Scottish Government would receive funding via the Barnett Formula to assist in meeting the expenses associated with the NI adjustments.
In summary, the changes in National Insurance contributions will have a significant financial impact on Perth and Kinross Council and its associated organisations. The council and its partners are bracing themselves for substantial additional costs, prompting concerns about potential ramifications on services and staffing. The support pledged by the UK Government through the Barnett formula aims to alleviate some of the financial burdens placed on local authorities like Perth and Kinross.