By Joe Locker, Local Democracy Reporter
Nottingham City Council’s deputy leader has admitted Chancellor Rachel Reeves’ budget will cost the authority more money.
However, he says “on the flip-side” it will prove a welcome change for workers struggling to live on the minimum wage.
Ms Reeves delivered the Labour Party’s first budget in almost 15 years on Wednesday (October 30), announcing tax rises worth £40bn to stabilise public services and finances.
Rather than hiking the rate of income tax and National Insurance (NI) paid by employees, she said employers themselves will soon have to pay more in NI contributions.
The current £9,100 threshold employers start paying contributions will decrease to £5,000, and the percentage of contributions will also go up from 13.8 per cent to 15 per cent from April.
Additionally, the minimum wage for those aged 21 and over will increase from £11.44 to £12.21 per hour from April, and the rate for 18 to 20-year-olds will rise from £8.60 to £10.
“It will affect the cost of staffing budgets because a lot of our staff are on minimum wage,” Cllr Ethan Radford (Lab), the deputy leader of the council, told the Local Democracy Reporting Service.
“Areas that might see costs rise include external contracts with care providers who employ staff on minimum wage. Those care packages will now cost more.
“There are going to be third-party costs. It might impact some of the budget proposals this year.
“On the flip side for people who have been on minimum wage, the increase will be a very welcome change. It will cost the council more but we have to look at the individuals.
“We welcome the increase because it is right people are paid fairly. It is right they can cover their living costs. And this increase will be beneficial to the local economy, there will be a noticeable impact.”
Nottinghamshire County Council’s leader, Cllr Ben Bradley (Con), estimates the costs of the minimum wage increase on the authority’s budget to be in the region of £20m.
However Cllr Radford said the monetary impact of the changes on the City Council’s budget was not yet known.
Cllr Andrew Rule, who represents Clifton West for the Nottingham Independents and Independent Group, fears the increase on employers’ National Insurance contributions may simply make the authority’s staffing issues worse.
The Labour-led council has often been forced to employ costly agency workers to fill gaps in its workforce.
“The budget has added increased pressures with the National Living Wage and employer tax,” Cllr Rule said.
“The employment tax will negatively impact employment, and that is not going to help with the staffing issues at the council.”
According to the Government’s Budget ‘Red Book’, the Local Government Departmental Expenditure Limit (DEL) budget for 2025/26 will increase to £14.3bn – from £11.4bn.
This includes an additional £1.3bn of new grant funding for local authority services, including at least £600m in new grant funding for social care.
The Chancellor also committed to a multi-year financial settlement for local councils.
Previously settlements had been awarded on an annual basis, with the amount confirmed in December each year – a matter of months before budgets have to be set.
Cllr Radford said annual settlements failed to give councils adequate time to plan, while settlement figures were often only confirmed once local authorities had largely completed the budget process.
“It could lead to a position where you had gone too far [with savings], or not far enough,” he said.
Nottingham City Council is currently facing a £68.7m budget black hole next year (2025/26) and a cumulative £172m by 2027/28.
