The UK Government’s controversial increase in employers’ national insurance is set to cost Plymouth City Council approximately £2 million, raising concerns over budget balancing and tax hikes.

Starting in April, all local authorities will face a 1.2% rise in national insurance contributions. Councillor Steve Ricketts, an independent representative for the Drake ward and a member of the council’s budget scrutiny committee, has strongly opposed the hike, calling it 'hideous.' He stated that the increase will make it impossible to achieve a balanced budget, ahead of the council’s full vote on February 24.

Council documents reveal that the direct impact of the national insurance rise on council staff is estimated at £2.3 million. Although the Government has set aside £515 million to help local authorities cover these costs, it remains unclear how much Plymouth will receive. The council is currently estimating an additional financial burden of around £2 million.

'We were expecting assurances from the Government that they would cover these costs,' said Ricketts. 'This hike is harming businesses and putting local councils in a difficult position. It’s unacceptable.'

Ricketts also expressed frustration over rising council tax, expected to increase by 5%, and accused the council of mismanaging funds. 'This is the worst budget I’ve seen in 20 years. We are making people cold and poor while wasting money,' he added.

The Local Government Association (LGA) has warned that councils across the UK face a £637 million shortfall due to the national insurance hike, which was announced in Chancellor Rachel Reeves’s autumn Budget. Additionally, councils may incur another £1.13 billion in indirect supplier costs.

Although the Government has allocated £515 million to support councils, the LGA argues that this amount falls significantly short of what is needed. Without sufficient funding, local councils will likely have to raise taxes and cut services.

Communities Minister Jim McMahon acknowledged the funding issues, stating that while the settlement is 'good, but not perfect,' some councils will inevitably be worse off. For example, Oxford Council is set to receive £300,000 in compensation, while the national insurance hike is expected to cost it £1.4 million.

With uncertainty surrounding Government compensation and financial strain on local budgets, Plymouth City Council now faces difficult decisions on spending, taxation, and service provisions in the coming months.