Council expects shortfall because of National Insurance rise

East Devon hoped government would plug shortfall

Disappointment has been expressed in East Devon about the potential shortfall local councils could face for rising employment costs.

All employers are facing a hike in staff costs because of forthcoming rises in National Insurance (NI), and East Devon District Council believes it could create a £370,000 hole in its finances.

In last year’s budget, chancellor Rachel Reeves increased NI from 13.8 per cent to 15 per cent from April, and lowered the point at which it starts being paid to £5,000 from the current £9,100.

This means employers will have to pay more for workers who were earning between those two amounts, which is often for part-time staff.

“We’re saying it takes us to a £370,000 shortfall in our budget, which may reduce when we get the final numbers in from the government funding settlement, but it is really disappointing and quite a surprise compared to the statements made around NI,” Simon Davey, East Devon District Council’s finance director told the joint scrutiny and overview committees in a meeting about the draft budget.

Mr Davey said the government had only given councils a methodology to work out how much of the increas would be reimbursed, so the level of support could change when final numbers were published.

“We have gone away and applied the methodology and it comes up with a shortage, and the same calculation has been done by other authorities,” he added.

Mr Davey said the government might only reimburse councils for a third of the rise in NI, but that the council, and others, were responding to Westminster with their concerns.

A spokesperson from East Devon District Council said: “We had a balanced draft budget on the assumption we would be reimbursed the NI increases as previously stated by government, [but] the provisional finance settlement indicated we will be short of funding this cost by £370,000, so at this late stage we will have to take this from reserves.”

Earlier this month, Mid Devon District Council said it believed the changes to NI would also cost it roughly £370,000 as it also expected to be compensated only for around a third of its rising NI costs.

For East Devon, though, councillors heard that a £500,000 reserve that had been added to this financial year’s general fund – covering day-to-day spending on services and income from charges – would be rolled over into the 2025/26 budget.

That could help it mitigate higher NI costs.

East Devon is also proposing to increase various fees, such as for parking, and is launching new ones.

Parking charges are proposed to rise by 10 per cent – which includes parking permits – and new potential fees include charges for weddings at Sidmouth’s Connaught Gardens, which range from £50 plus VAT to secure a date, through to £1,000 for between 50 and 100 guests.

Photographers and filmmakers could also be charged to use council land from April if the draft budget is agreed, with fees ranging based on the size of crews and the length of their shoot.

However, another change may be welcomed by event organisers, who look set to only pay partial fees if they cancel their events.

The amount relates to how much notice they give to the council, with 90 days’ notice meaning they only pay a quarter of the cost, but no refund given for only a week’s notice.