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Senior UK Treasury officials have confirmed that they will not reimburse the public sector for any higher employer national insurance contributions paid to businesses contracted by councils, health boards etc.

Private businesses across the board will have to stump up while the public sector will have less money for services. Ironically, Tory councils which outsource a large proportion of services, such as bin collections and parking wardens will be hardest hit.

The disparity emerged at a hearing of the House of Commons Public Accounts Committee – a cross-party group of MPs who scrutinise public spending.

Asked if councils would be reimbursed for the extra cost of employing contractors, Cat Little, the Treasury’s chief of public spending, admitted she “cannot commit” to compensation for outsourced workers and “cannot confirm” whether local authorities would get compensation if it were needed to stop them hiking council tax.

Ms Little added that officials will “look at the consequences” for councils before next month’s budget, which will lay out the 1.25 percentage point national insurance rise in more detail.

Patricia Gibson MP said:

“Prior to this revelation, councils were already facing pressure to raise the council tax as soon as next year due to the way the UK Government plans to spend the money raised from the National Insurance hike.

“Ministers privately believe council tax rates will need to rise at least 5% on average.

“It’s no wonder that backbench Tories have urged Boris Johnson to reconsider the hike, which broke a Tory manifesto pledge and is opposed by trade union leaders and business chiefs alike.

“Taxation should be progressive and not impact disproportionately on the young and low paid. Nor should it act as a disincentive to employ people.

“Meanwhile, after refusing to set out his party’s alternative to the levy for several days, Labour’s dithering leader Sir Keir Starmer said that taxing investment would be fairer.”



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