How will the government cover National Insurance rise for councils?

The government has announced a series of financial measures aimed at supporting local councils.

This includes a new Recovery Grant and additional funding to offset the cost of rising National Insurance Contributions (NICs).

Under the provisional local government finance settlement for 2024 to 2025, councils will receive £515 million in compensation for increased NICs, helping to alleviate direct cost pressures.

The Local Government Association (LGA) had raised concerns about the impact of the increase in employer National Insurance Contributions (NICs) on parish and town councils.

• How does the new funding work?

The new funding will be incorporated into Core Spending Power in the final settlement, alongside the introduction of a new Recovery Grant.

Cllr Louise Gittins, Chair of the Local Government Association (LGA), welcomed the announcement but expressed concern that the funding will still fall short of the £637 million estimated to cover all NICs-related costs.

She noted that indirect cost increases, such as those borne by commissioned care providers, could total an additional £1.13 billion next year.

She said: “It is good that the Government has provided details of how it will compensate councils for direct costs they will face through increases in employer National Insurance Contributions (ENICs).

“However, this falls short of what we have estimated it will cost councils next year.”

The funding forms part of a wider package of measures aimed at tackling challenges such as adult and children’s social care, homelessness prevention, and support for children with special educational needs and disabilities.

However, Gittins warned many councils would still be forced to raise council tax and make cuts to vital services to balance their budgets.

Cllr John Cotton, Leader of Birmingham City Council, also welcomed the government’s efforts, describing the settlement as a turning point.

He emphasised the importance of additional funding for homelessness, which will provide £17.7 million to tackle the crisis in Birmingham.

He said: "Today’s news demonstrates the difference that a Labour Government makes. The increase to our funding will further help to put the council back onto the path to financial sustainability and deliver the services our residents need."

Despite these positive steps, both leaders acknowledged the ongoing difficulties councils face in addressing rising costs and demand pressures.

The government’s spending review, which includes a commitment to multi-year settlements, will be critical in determining the long-term sustainability of local government funding.

The methodology behind the provisional settlement, including details on how the Recovery Grant will be allocated, remains under review.

Birmingham City Council has confirmed it is analysing the specific impacts of the settlement on its finances for 2025/26.

Subscribe free to our weekly newsletter for exclusive and original coverage from ITV News. Direct to your inbox every Friday morning.

Have you heard The Trapped? Listen as Daniel Hewitt exposes the UK's dirty secret.