Over 1,000 charities have signed a letter urging chancellor Rachel Reeves to intervene after recently announced increases in employer national insurance contributions (NICs) will create an extra bill of £1.4bn per year for the sector.
Umbrella bodies NCVO and ACEVO published an open letter to Reeves yesterday evening, voicing concerns over the impact of this week’s budget announcements, which has since garnered more than 1,000 signatures from charities and voluntary organisations.
NCVO estimated that the increase in employer (NICs) will cost charities an annual additional £1.4bn overall, with the Daily Mail using this figure on its front page today.
The open letter says charities of all sizes in the UK, which collectively employ almost one million people, will be impinged by this.
“Ahead of the budget, we have been clear that charities are in a dire situation as they try and meet the demands of rising need in communities while their own costs escalate and funding declines,” the letter reads.
“The decision to increase employer NICs – and not to carve out an exemption for them – will place another major strain on charities at a time when we are already struggling.”
“The harsh reality is that many organisations may be forced to reduce staff, cut salaries, and most importantly, scale back services for the very people they strive to support.”
‘Biggest shock to the sector since the pandemic’
Sarah Elliott, NCVO’s chief executive, 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 NICs 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, 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 to deliver vital services to the people and communities that rely on them.”
Hopes for ‘meaningful discussion’ with government
ACEVO’s chief executive Jane Ide said she hoped that a recent meeting with prime minister Keir Starmer and culture secretary Lisa Nandy could lead to some government support over NICs increases.
“We are hearing from our members that the effect of the employer NICs 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,” she said.
“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.”
RSPCA chief executive Chris Sherwood said the NICs rises could cost his charity more than £1m next year.
“The charitable sector already delivers vital services – utilising its expertise and resources to help people and animals alike – which often takes the strain away from the public purse.
“But failure to provide exemptions or allowances for charities when implementing these employer national insurance hikes risks placing additional pressure on what is already a challenging financial backdrop for so many charities; and could end up costing the taxpayer more if charitable services are cut.”
A HM Treasury spokesperson told Civil Society: “Our tax regime for charities, including exemption from paying business rates, is among the most generous of anywhere in the world with tax reliefs for charities and their donors, worth just over £6bn for the tax year to April 2024.
“The government will protect the smallest businesses by increasing the employment allowance to £10,500 which means that next year 865,000 employers will pay no NICs at all.”
I’ve signed up to this open letter to the Chancellor about the impact of the increase in NI Employers contributions to charities-I know many local partners in the @age_uk network are concerned about this at a time when demand on our services have never been higher. https://t.co/LcBd08tYgV
— Paul Farmer (@paulfarmerceo) October 31, 2024
Local community organisations have seen rising demand by dealing with a series of crises and a reduction in their income. We're hearing significant impacts from members on the increased costs and we agree that more Government support urgently needed to support vital services https://t.co/JnY2KQCNYW
— Tony Armstrong (@antlondon) November 1, 2024
Editor’s note: This article has been updated on 4 November to include the Treasury's statement.
