National Insurance: Health and Social Care tax will cost Welsh public services ‘£80m – £90m a year,’ First Minister reveals

The cost to Welsh public services of next year’s National Insurance hike will be between £80 million and £90 million a year, the Welsh Government estimates.

It also calculates that 12 per cent of the money raised by the UK Government’s Health and Social Care tax will come from people who work in health and social care.

The sums were revealed on Tuesday (28 September), when Joyce Watson MS questioned First Minister Mark Drakeford about the tax rise.

From April 2022, employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance. An employee on £20,000 a year pay an extra £130; someone on £50,000 will pay £505 more.

The Labour Mid and West Wales member said the UK government must ‘fully compensate and support’ Wales to bring in the changes:

“It’s bad enough that this is an enforced tax rise on working people in Wales – it mustn’t be a financial and administrative burden on our public services as well,” she argued.

In response, Mr Drakeford admitted that “We’ll never know” the true costs of the NI increase, but said it would “adversely affect Welsh public services in a number of ways”. He explained:

“Employer national insurance contributions will drive up costs for all public services, while employee contributions will fall disproportionately on lower-paid workers who do so much to provide these services in Wales.

“Our initial estimate is that the direct cost to Welsh public services of employer national insurance contributions will be somewhere between £80 million and £90 million a year, and that does not include any contracted staff that they may have, as will be very common in social care.

“What is certain is this: that of the money that the UK Government says will be invested in health and social care after April of next year, fully 12 per cent of it will come from the national insurance contributions of people who work in health and social care. So, it is the people who are doing the job who are being asked to pay for the money that is being provided.

“That is why we have said all along that national insurance was not the right vehicle through which to provide the very necessary funding for those vital public services.”

Under the UK Government plan, after one year, from April 2023, National Insurance will return to its current rate, but the extra money will be collected as a new Health and Social Care Levy. Unlike National Insurance, this will also be paid by state pensioners who are still working.