In this week’s budget, the Chancellor announced plans to increase employer National Insurance Contributions (NICs). Estimates from the National Council for Voluntary Organisations (NCVO) show this tax raising measure is set to cost the charity sector, which employs almost a million people, an additional £1.4bn per year.
Charities of all sizes will feel the impact of the employer NICs increase, and because of already difficult operating conditions will have less flexibility than ever to absorb these increasing costs.
Many charities will be forced to make difficult choices in the coming months as a result of the planned increases – including reducing staff, cutting salaries, and most worryingly, scaling back or suspending services, which could leave the people and communities they support at greater risk.
Sector membership bodies, the National Council for Voluntary Organisations (NCVO) and the Association of Chief Executives of Voluntary Organisations (ACEVO) have written an open letter to the Chancellor to outline the potential impacts, and the risk that not addressing this could include.
Sarah Elliott, CEO of NCVO said: “Since the budget on Wednesday, we have received countless messages from worried charity leaders. This is the biggest shock to the sector since the pandemic. Changes of this magnitude to employer national insurance contributions will have massive consequences. Our data shows that the changes will create an additional strain on the sector of £1.4bn. Charities across the country are already in a dire situation, juggling a triple threat of rising demand, escalating costs, and falling funding. This additional cost, for which there is no headroom in budgets to cover, will be devastating. Addressing these concerns is vital to ensuring charities can continue deliver vital services to the people and communities that rely on them.”
Jane Ide OBE, CEO of ACEVO said: “We are hearing from our members that the effect of the employer national insurance contribution increases, combined with the continuing financial pressures experienced by many civil society organisations, are causing great concern for sector leaders who have limited choices in how to ensure their operations adapt to absorb the impact. We trust that the recent words from the Prime Minister and Secretary of State emphasising their belief in the value of a strong civil society will mean that the doors are open to meaningful discussion of these issues.”
Charities and voluntary organisations are being invited to co-sign the letter, which is available on NCVO’s website: https://www.ncvo.org.uk/news-and-insights/news-index/open-letter-chancellor-national-insurance/.