Schools To Be Fully Reimbursed For National Insurance Rise
3 min read
State schools will be fully reimbursed for the rise in National Insurance for employers announced by Rachel Reeves in the Budget, PoliticsHome understands.
The Chancellor confirmed on Wednesday that employers will see their National Insurance contribitions rise by 1.2 to 15 per cent from April 2025. She also announced that the level at which employers pay contributions on each employee’s salary would be lowered £9,100 per year to £5,000, as part of a package of tax rises expected to raise £40bn.
The news had triggered concern in the education sector about the added costs this would mean for schools that already face financial pressures and a struggle to recruit and retain staff.
The Budget yesterday set out that £23,770m would be provided to the public sector for the impact of the rise in National Insurance contributions in 2025-26, with similar amounts being paid out every other year in this parliament. But questions remained over whether the rise would be fully met or essentially discounted.
However, since Reeves' House of Commons statement yesterday afternoon, the Government has confirmed to sector figures that the costs of the rise will be fully funded from the spring.
Paul Whiteman, general secretary of the National Association of Head Teachers (NAHT), told PoliticsHome: "NAHT members will be reassured by the post-Budget briefing from the Government... [where] it was confirmed that the funding represents a real-terms increase to cover the NIC increases."
Earlier this month, analysis by the National Foundation for Educational Research (NFER) had warned that a one per cent rise in National Insurance contributions for employers could cost schools between £175m and £200m.
NFER chief executive, Carole Willis, said at the time that any unfunded employer contribution increases would likely "further exacerbate funding issues for schools" and "impact negatively on children and young people’s learning and experiences".
Other sector figures welcomed the news but said they would exercise caution before seeing the details of how it would work.
Leora Cruddas, chief executive of the Confederation of School Trusts, said: "We are pleased that the DfE has confirmed schools will be compensated to cover the increase in employer National Insurance contributions.
"We have yet to understand the amount or methods of compensation but DfE has confirmed that the compensation will be to cover the net effect of all the NIC changes.
"The changes to NI are extremely complex and we will continue to work with the DfE to bring greater clarity on this."
Education featured heavily in the Labour Government's first Budget since being elected.
Reeves announced that the core schools budget would be increased by £2.3bn next year, with £1bn of that to be provided for reforming special educational needs provision.
However, Jon Andrews, head of analysis and director for school system and performance at the Education Policy Institute, told PoliticsHome the money represents just "a quarter of the deficits that the National Audit Office (NAO) estimates that local authorities have accumulated".
A report by the NAO last week described the SEND system, which is designed to provide education to children with disabilities and special needs, as “financially unsustainable”.
Andrews said ministerswill need to provide clarity "on how that funding will be allocated or what it is intended for is now urgently required".
"If the situation for local authorities has not been fundamentally changed, then we still risk services for our most vulnerable being cut."
Reeves also announced that the Department for Education would receive £6.7bn of capital investment, including £1.4bn to rebuild over 500 schools, and a further £2.1bn to improve school maintenance.
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