THE increase in employers’ National Insurance contributions is expected to cost Monmouthshire County Council £3 million but there is concern suppliers and charities will suffer.

The UK Labour government announced in its October budget it would increase the rate of employers’ National Insurance contributions for every member of staff they employ and lower the threshold from which it is applied.

Conservative councillor Paul Pavia called the decision “shortsighted” when he asked how it will impact Monmouthshire County Council’s budget and the firms the council works with such as its suppliers as well as voluntary or third sector bodies and charities which provide a range of services in the community.

The Chepstow Mount Pleasant councillor said: “The voluntary and third sector will be desperate to find a way to absorb these costs or the impact will be many will have to cease their activities.”

He asked how the Labour-led council administration intended to mitigate the impact of community services folding.

Cllr Ben Callard, the Labour cabinet member responsible for finance, said that would “probably best” be taken into consideration during the council’s forthcoming budget process and said: “I look forward to having that discussion with them.”

The Llanfoist councillor said the council has calculated its own costs, as an employer, will increase by £3.1m but it expects funding from the UK Government, in the first half of the next financial year, to cover that cost.

He said the indirect impact, of the cost burden on suppliers and groups the council works with, is “more complex” and will be affected by their size, staffing structures and whether they are entitled to any relief as well as their ability to absorb the costs.

Cllr Callard said the council wants to understand the impact and said: “We will continue to work with the Welsh Government and help them understand the impact of the National Insurance increase.”

Cllr Pavia said it “isn’t clear” from the Welsh or UK Governments additional funding for the increase will be provided and said without it the “derisory” 2.8 per cent increase in core funding, for Monmouthshire, from Cardiff Bay would be “swallowed up” by the additional cost.

Cllr Callard said the council was “a little disappointed” with the size of its funding increase, which was the lowest in Wales, but said based on the previous Conservative budget the authority wasn’t expecting any increase at all from the Labour government in Wales.

The Budget outlined policies to increase spending by almost £70bn a year over the next five years.

About half of this is being funded by tax increases, with the other half coming from a rise in borrowing.

The NI rise for employers is set to raise £20bn a year making it one of the biggest single tax-raising measures in history.

From next April, employers will have to pay NI at 15% on salaries above £5,000, instead of 13.8% on salaries above £9,100 currently.