Autumn Budget 2024
The Chancellor of the Exchequer presented her Autumn Budget to parliament on 30 October 2024. The Chancellor has increased government spending by around 2% of GDP a year, on average, over the next five years. One-third of the additional spending will go on the government’s investment spending on things such as transport, housing, and research and development. The remaining two-thirds will go on the government’s day-to-day spending. Half of the increase in spending is funded through an increase in taxes, mainly through higher employer National Insurance contributions and capital taxes. The remaining half is funded largely through additional borrowing.
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House of Lords - 11 November 2024
This parliamentary briefing was published on 8 November 2024.
Background
This briefing has been prepared for Peers ahead of the House of Lords Autumn Budget debate on 11 November 2024. In the 2024 Autumn Budget, the Chancellor of the Exchequer announced an increase to the rate of employer national insurance contributions (NICs), from 13.8% to 15%. Alongside this, a reduction in the per-employee threshold at which employers become liable to pay national insurance (the secondary threshold) from £9,100 to £5,000, commencing 6 April 2025, was announced.
Key issue
The OBR’s Economic and Fiscal Outlook, published alongside the Budget, stated that public sector bodies including the NHS would be compensated for employer NICs increased via RDEL budgets.
However, following conversation with the Ministry for Housing, Communities and Local Government (MHCLG), NALC has been informed that parish and town councils will not be compensated alongside other public sector bodies.
We calculate that these changes will cost English parish and town councils approximately £10 million each year. As a result, council taxes would require a 1.5% to 3% increase to cover the additional cost.
At present, the stated cost of compensating public bodies included within the government’s scope is calculated at almost £25 billion over the next five years. As stated above, the cost of compensating parish and town councils over the next five years would cost around £50 million.
Policy ask
Many parish and town councils are already well into their budget-setting process for the next financial year. At a time of considerable financial strain, this additional cost would make the process even more challenging and risk tax rises for local residents.
In addition to the fiscal context, this is a question of basic fairness. Parish and town councils are public sector bodies. The government has outlined a public sector compensation scheme for NICs increases. Parish and town councils are not currently included within that scheme.
In addition, the government’s Net Burden Doctrine states that: "the net additional cost of all New Burdens placed on local authorities (including parishes, police and fire and rescue authorities) by central government must be assessed and fully and properly funded".
As such, it is vital that parish and town councils are fairly compensated for the NICs increase, alongside other public sector bodies.
Key questions
- Does MHCLG intend to compensate local government for the employer NICS increase?
- Will this extend to parish and town councils? If not, why not? If so, what mechanism will be used to compensate parish and town councils?
- Has the government conducted any analysis regarding the need for potential council tax increases if local authorities are not compensated?
- Is the New Burdens Doctrine still in force? If not, when was it removed, and why?
