NI hike leaves hole in Wales' budget - Drakeford

Higher National Insurance payments for doctors, nurses and teachers has left the Welsh government with a £36m hole in its budget, according to the finance minister.

Last year, the UK government increased the amount employers have to pay in National Insurance (NI) with the Welsh government, which employs tens of thousands of public sector workers, left with a £257m bill.

The Finance Minister Mark Drakeford said he had added £36m from Welsh government reserves while the the Treasury provided £185m to help plug the gap.

However, it still leaves £36m to find, which could come from cuts to other services, as Drakeford said the government "cannot afford to cover the entire shortfall".

"The UK government should treat the public sector the same across the UK and make good on its pledge to fully fund these extra costs," he added.

The row is the latest dispute between the Labour administrations in Cardiff and London ahead of next year's Senedd elections.

First Minister Eluned Morgan said earlier this month she would "not stay silent" if Sir Keir Starmer's government takes decisions "we think will harm Welsh communities".

A UK government source said the Welsh government had received £21bn in last year's budget, the largest annual grant since devolution, and it had changed the rules to allow them to use more of their reserves.

The source added the UK government did this to "help the Welsh government invest in public services and drive down NHS waiting lists".

The Conservative's finance spokesperson, Sam Rowlands, said the funding gap would not pose such a substantial challenge "if Labour hadn't squandered hundreds of millions of pounds on vanity projects and inefficiencies".

Mr Rowlands called on the Welsh government to explain how they will address other financial pressures later in the year after "depleting reserves to plug this shortfall".

Plaid Cymru described the shortfall as "just the latest example of Labour failing Wales".

Heledd Fychan, the party's finance spokesperson, said: "The Labour Welsh government who promised we would be led to the land of milk and honey with two Labour administrations are being nothing more than bystanders to unfairness".

A spokesperson for Reform UK said the row was "the same old story".

"Labour in Westminster hikes taxes, Labour in Cardiff can't manage the fallout," they said.

The Liberal Democrats said the NI rise should be scrapped and that they had opposed the move "from day one".

Welsh ministers have tried and so far failed to get extra cash to cover the rise in National Insurance contributions for the public sector.

Their argument has been that the normal way of working these things out - the Barnett formula - does not take into account the disproportionate size of Wales' public sector compared to England.

Plaid Cymru and the Welsh Conservatives criticised the UK government decision to increase the tax in the first place and also want full compensation for Wales.

Expect them to seize on this and claim Wales is being hit by a double whammy - the increase is harming both Welsh businesses and the public sector.

Welsh Labour's relationship with UK Labour, and whether two Labour governments working together is better for Wales is becoming one of the main themes of next year's election campaign.