OPINION

Autumn budget fails to consider impacts of NI increases on voluntary sector employers

6 November 2024
by Sheghley Ogilvie

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Sheghley Ogilvie analyses last week's budget

Last week, following months of speculation, Britain’s first female chancellor, Rachel Reeves, delivered Labour’s first budget in 14 years. A historic moment and important opportunity.

The budget, the chancellor promised, would invest, invest, invest - partly by raising taxes by £40 billion in the hope of boosting long-term economic growth.

Unfortunately, little of this investment reached the voluntary sector. As is often the case, the essential services and support provided by voluntary organisations and our significant contribution to the wider economy was neither mentioned nor recognised.

This lack of recognition matters, particularly in a budget in which more than half of the tax rises were to fall on the shoulders of employers.

Across the UK the voluntary sector is a significant employer, employing over 1 million people, including 133,000 people in Scotland - 5% of Scotland’s workforce.

The much rumoured increases to employers’ National Insurance Contributions (NICs) will, therefore, have a significant impact on medium and large voluntary sector employers, as SCVO shared with the chancellor ahead of the budget.

Despite this, and promises to restore charities to the ‘centre of national life’, the impact of these changes on voluntary organisations seems not to have been central to budget decision making.

Voluntary sector costs are climbing, funding falling, and demand for services continuing to increase, as a result, 77% of voluntary organisations experience financial challenges.

With an estimated cumulative cost of £75 million to the sector in Scotland alone, changes to employer NICs is another pressure our struggling sector can ill afford.

The new Labour government has frequently championed its ambitions of a relationship with civil society built on the principles of recognition, partnership, participation and transparency. But action must come with rhetoric.

As the scale of the costs involved for medium and large voluntary sector employers begin to be understood, it is imperative that the chancellor offers the sector parity with the public sector.

The chancellor must recognise the potential impacts of these increased costs on the essential services and support the sector provides by ensuring that voluntary sector employers, like public sector employers, are reimbursed for additional employer National Insurance Contributions costs.

Similarly, while, SCVO welcome the increase to both the National Living Wage and National Minimum Wage - Fair Work for the voluntary sector workforce, including at least the Real Living Wage, is an SCVO priority - voluntary organisations must be supported and resourced to achieve their ambitions of becoming Fair Work employers. Values a Labour government committed to employer rights must share.

Labour must do more to support and resource Fair Funding for the sector, ensuring grants and contracts cover the full costs of employing staff and offer job security through multi-year funding.

Again, the budget offered little to reflect these ambitions, announcing that the UK Shared Prosperity Fund would be extended for just one year and reduced by a third, to £900m.

SCVO looks forward to a new relationship between the sector and the UK Government, and has high hopes for the chancellor’s promised multi-year Spending Review in Spring 2025.

In the meantime, the chancellor can and should recognise and support the many contributions of voluntary organisations by:

Recognising our sector as a significant employer and economic actor,
ensuring parity with the public sector by extending commitments to mitigate the increased NICs costs to the voluntary sector
and ensuring grants and contracts cover the full costs of employing staff.

Take action

Sign NCVO's Open letter to the chancellor on the impact of increased employer National Insurance Contributions for charities.

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