New rules regarding National Insurance Contributions will see a quarter of a billion pounds cut from Scottish public sector budgets in the coming year. These rules were proposed by George Osborne in 2013 but come into force in April this year. This is in addition to the public service pension changes announced in last week’s budget.
UNISON carried out a Freedom of Information request to calculate the loss of funding to public services as a result of these NI changes. Public service employers who were contacted by UNISON identified an over £238m budget spread. A conservative estimate suggest that once other areas of the public sector are considered, like Scotland’s colleges and universities, the overall cost to Scotland’s public services will reach well over quarter of a billion pounds .
The increase is linked to changes in state pension rules, specifically the Government’s decision to institute a single tier state pension abolishing the additional state pension. Prior to this employers offering an occupational pension which replaced part or all of the additional state pension could “contract out” of the additional state pension and this attracted a lower rate of National Insurance Contribution to be paid by employers. The changes mean public sector employers will have to pay more towards pension schemes. These changes were made in 2013, but will impact from April 2016 when they will be introduced.
The red book accompanying the 2013 budget estimated that the increase in National Insurance contributions will net the Treasury a £5.6 billion windfall, with around 50% of that coming from public sector employers in higher employer NICs. This means the total tax raid on Scotland, including the private sector, is likely to be over half a billion pounds.
Police Scotland pay bill will increase by £20m. Scotland’s hard pressed college Sector will see an increase of well over £3m to their salary costs. The Scottish Government budget estimated that the addition to the pay bill would be around a quarter of a billion pounds. Our Freedom of Information survey suggests that this is likely to be a conservative estimate.
Scotland’s hard pressed councils will face this additional burden on top the cuts in the Scottish Budget.
Costs revealed by UNISON’s Freedom of Information request
- Health Boards £82 785 432 (excludes Lothian Health Board, UNISON estimate £13m)
- Local Authorities £118 680 395 (31 out of 32 Local authorities replied)
- Scottish Government £4 300 000
- Police Scotland £20 300 00
Many workers will also face an increase in their NI contributions of 1.4%. For most workers in contracted out pension schemes this will largely wipe out this year’s pay awards.
Dave Watson, head of public affairs at UNISON Scotland said, “These changes to national insurance contributions amounts to, at very least, a £250m cut to public services. This is on top of the worst cuts to our public services in living memory. This means, that the total cash cuts to Scottish Councils is in the region of £500m this year. This money, that should be spent on vital public services, is being clawed back by the UK Treasury to pay for more tax cuts for the rich.
These levels of cuts cannot continue without a fundamental change in what we expect from our services. So much of public services makes a positive difference to lives of people across Scotland like early intervention, preventative spending, and public health. Governments must invest in public services that benefit us all.”
UNISON is Scotland public services trade union. It is the biggest trade union in Scotland
Dave Watson, head of public affairs, 07958 122409
Danny Phillips, communications officer, 07944 664110