The Senedd rejected Conservative calls for the UK Government to compensate charities for the increasing cost of employer national insurance (NI) contributions from April.
Mark Isherwood called for Welsh charities, not-for-profits and voluntary organisations, which play a crucial role in delivering public services, to be reimbursed for the extra costs.
The Conservative criticised Rachel Reeves’ “debt-driving, tax-hiking and job-destroying” first budget as UK chancellor and Labour’s “cruel” decision to increase NI contributions.
Mr Isherwood warned of false economies, with the UK tax set to rise from 13.8% to 15%
“swallowing up” increases in funding through the Welsh budget.
“This is dumb economics,” he told the Senedd.
‘Devastating’
The north Walian raised concerns from the Wales Council for Voluntary Action (WCVA), an umbrella organisation for the sector, about the impact of NI increases across the country.
Mr Isherwood said the WCVA has warned many voluntary organisations already face significant financial pressures, with the extra strain jeopardising vital services.
He pointed to comments from cancer care charity Tenovus which described the rise as devastating and urged the Welsh Government to mitigate the impact.
Adferiad, a mental health and addiction charity, told the North Wales representative that the rise will cost £600,000 a year, potentially leading to reduced services and staff being let go.
Mr Isherwood warned that the 16 charitable hospices in Wales are all facing deficits and having to consider “significant” cuts which would lead to “huge gaps”.
‘Urgent need’
He said: “They provide essential care to over 20,000 children and adults in Wales affected by terminal and life-limiting illnesses each year, and provide a huge cost saving to the NHS.”
Leading a Tory debate on March 19, Mr Isherwood stated hospices urgently need £5.9m to cover the impact of NHS pay rises and safeguard the immediate future of services.
The motion urged Welsh ministers to call on their UK counterparts to ensure charities are included in the ONS definition of public sector employer and reimbursed NI costs as a result.
Heledd Fychan, Plaid Cymru’s shadow finance secretary, argued the cost of increases to employer NI contributions to core public services should be fully covered by Westminster.
The UK treasury intends to use the Barnett formula to calculate funding for Wales based on the costs in England, which could leave public bodies facing a shortfall.
‘Breathtakingly cynical’
Conservative Tom Giffard warned the uplift in NI contributions could cost the voluntary sector across the UK a “whopping” £1.4bn a year, according to estimates.
Labour’s Lee Waters described the Tory motion as “breathtakingly cynical, incoherent and opportunistic”, questioning where the opposition would find extra money for public services.
But he said: “I do have some sympathy with the arguments about NI contributions, I think it is the wrong tax to be raising and I regret the fact that other taxes have been ruled out…. I don’t think it’s the right call but there is a significant deficit in public spending.”
Mr Waters, a former minister, cautioned that the Labour UK Government inherited “threadbare” public services and a “rotten” economy from the Conservatives.
Responding for the Welsh Government, Jane Hutt recognised concerns about the impact of NI rises on public bodies which commission services from the third sector.
‘Non-devolved’
Ms Hutt, who is responsible for the voluntary sector in Wales, said the UK Government more than doubled the employment allowance to protect the smallest businesses and charities.
The social justice secretary stressed that NI is non-devolved, adding that Welsh ministers will continue to make representations to their counterparts in Westminster.
She told Senedd members: “The UK Government has confirmed it will provide funding to public sector employers to cover the increased cost of NI contributions.”
Ms Hutt said the Welsh Government has initially estimated the additional NI cost to devolved public sector employers in Wales at £253m.
Senedd members voted 36-14 against the Tory motion before a version amended by Plaid Cymru and the Welsh Government was agreed by the same margin.