The increase in employer national insurance contributions is estimated to cost public service providers in Scotland over £700 million
Community Pharmacy Scotland (CPS), along with 47 public and voluntary sector organisations, has endorsed a letter to UK Chancellor Rachel Reeves, seeking funding support for employer national insurance contributions ahead of the planned increases from the 1st of April 2025.
The letter, co-signed by first minister John Swinney and COSLA president Shona Morrison, raises concerns over the impact of the impending increase, which is estimated to cost public service providers in Scotland over £700 million.
The Scottish Government calculated that the policy's cost for the directly employed public sector could be around £550 million, with councils accounting for about £265 million of that total. If contractors and commissioned services are included, the total costs could exceed £700 million.
The letter also underscores the significant impact on charitable organisations, stating that “there is a real risk that these costs will see employers unable to award meaningful pay rises, retain staff or even continue to operate.”
The Scottish Council for Voluntary Organisations has estimated that the Third Sector, comprising charities, social enterprises and grassroot community groups, will face additional costs of £75 million per year, plus wider inflation.
The letter reads: “Whether applied to public sector employers, or a broader public services cohort of employers, a Barnett share of the funding which is made available based on the actual costs to UK Departments and local government in England will fall some considerable way short for Scotland given our relatively larger public sector workforce.
“As a result, such an approach would see the Treasury essentially profit from public service employers in Scotland, while the equivalent employers in England are fully reimbursed.”
The signatories urged the Chancellor to take an actual costs approach to the additional funding and to confirm this before the final stages of the Scottish Budget to allow them to plan appropriately.
“The impact for our communities and for the effective management of public finances will otherwise be highly damaging,” the letter notes.
The Scottish Budget, published on 4 December, remains subject to parliamentary approval, and is expected to be finalised in February.
Shona Robison, cabinet secretary for finance and local government, has earlier written to the Chief Secretary to the Treasury regarding this critical issue.
She stressed the importance of ensuring that the funding provided to the Scottish government fully covers the increased costs of employer national insurance contributions and extends to all organisations delivering public services affected by this change.
