Council tenants in Aberdeen could bear the brunt of Labour’s National Insurance hike in their rent bill, The P&J can exclusively reveal.
City chiefs were already considering putting up rents on two, three and four bedroom homes by as much as 10% from next April.
Now, The Press and Journal has been told an extra percent might have to be added as a direct result of a £900,000 National Insurance-shaped budget hole.
The move to plug the gap is being branded an unavoidable “tenants’ tax” by SNP housing convener Miranda Radley.
How much could the so-called ‘tenants’ tax’ cost Aberdeen residents?
In announcing increased employer contributions, the Labour UK Government promised not to hit working people.
But Ms Radley claims Chancellor Rachel Reeves’ “unmitigated disaster” could mean rent for a two-bedroom flat increases by £523 a year in Aberdeen, an extra £48 than was previously considered.
Meanwhile, residents of a four-bed house could have to pay £679 more – up £62 on the worst possible increase proposed for the year.
Aberdeen council rents already on the rise?
It comes as experts predict the cost of heating homes will rise again in January, amid the ongoing cost of living crisis.
Aberdeen council tenants were last month surveyed on proposed rent increases, as well as plans to squeeze another five years out of kitchens and bathrooms before they could be replaced.
It comes as the council considers an eye-watering £25m to demolish homes in Balnagask riddled with dangerous Raac concrete, as well as works to bring a growing number of empty properties up to rentable standards.
National Insurance a new problem for Aberdeen’s council housing budget
But changes announced in Chancellor’s Budget last month could add to the headache.
The UK Government wants to increase NI contributions paid by employers, as well as lowering the threshold at which they have to pay them.
Aberdeen City Council pays more than 200 people directly out of its housing budget which funds 23,000 homes.
And the NI change would be a £900,000 hit to that ringfenced account.
That figure is part of a wider NI hit to the local authority that The P&J previously revealed was feared to be around £7.7 million.
Council already proposing ‘make do and mend’ budget measures
But the local authority’s problem regarding the Housing Revenue Account is that there are really only two ways of boosting the balance: rent increases or cuts.
The proposals for a 10% rent increase and eking out life from tired kitchens and bathrooms were a package of measures officials came up with to balance the books as things stood before Budget day on October 30.
To cover the extra £900,000 – a number from senior city officials, not politicians – there is now talk of another 1% being added to rents.
The SNP’s Ms Radley claims council top brass are clear that any extra cash from Westminster to Scotland to cover the NI raise won’t include compensation for staff employed by the housing budget.
‘Tenants’ tax’: National Insurance hike an ‘unmitigated disaster’ for Aberdeen council housing
Ms Radley is urging the Chancellor to reconsider that “poorly thought out” omission.
She told The P&J: “Labour’s hike to employer National Insurance contributions is going to be a complete disaster for our council tenants.
“Labour promised not to raise taxes for working people, but this is a tenants’ tax that will be hitting every council tenant here in Aberdeen, and across Scotland, if they do not address this issue.
“Tenants shouldn’t have to pay the price for Labour’s poorly thought-out NI hike.
“They have provided no clarity to date on the compensation for the wider public sector, our arms-length organisations [like Sport Aberdeen and Bon Accord Care], and the third sector who carry out services on behalf of the council.
“This is an unmitigated disaster and Labour need to wake up and act quickly to fix it.”
UK Government: NI rise needed to save ‘crumbling’ public services
The UK Government is heralding the “largest real terms settlement” for Scotland in 25 years.
Ministers have made clear that private firms or charities contracted by councils to provide public services will have to bear the NI increase.
But they’re promising to provide – as yet undefined – support for the public sector to cover the hike, which they say will raise £25 billion.
A spokesman added: “With public services crumbling across the UK including Scotland, and an inherited £22 billion fiscal black hole from the previous government, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability.
“Funding for local government is devolved to the Scottish Government and it will receive additional funding on top of its record £47.7 billion settlement to support with costs associated with changes to employer National Insurance.”
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