Employer National Insurance Contributions: Charities

I beg to move,

That this House has considered the impact of changes to employers’ National Insurance contributions on the charity sector.

The background to this debate is the October Budget presented by the Government, and in particular the rise in national insurance contributions for employers. The rate was raised to 15% and the threshold at which national insurance contributions apply was brought down from £9,100 to £5,000, bringing in some part-time workers who previously had not caused their employers to be subject to national insurance contributions. Much has been said about the impact of the rise on the economy, but less has been said about the impact on charities.

Charities deliver almost £17 billion-worth of public services a year. Public services and civil society could not operate without charities. There is a tendency to overlook the important work they do. Particularly at the level of local government, charities are responsible through contracting for the delivery of a lot of the services that local governments are required to deliver.

I thank the hon. Member for securing this important debate. The Balsam Centre is a charity in Wincanton in my constituency that delivers some of the vital services that the hon. Member talks about, including maternal mental health support and youth counselling. The NI changes mean that it will have to find an extra £40,000 for its salary costs next year, cancel any pay increases and operate at a reduced capacity from April. Its work relieves pressure on the NHS and on local government, so does the hon. Member agree that the Government must rethink the national insurance changes?

I of course agree with the hon. Member that the Government must rethink the changes. I will go on to use examples from my own constituency, and I thank her for doing so with hers.

Will the hon. Member give way?

I will make a little progress and then I will be happy to give way.

The National Council for Voluntary Organisations estimates that the overall cost of the money taken from charities and transferred into the Treasury will be £1.4 billion. That is money being taken from charitable sources and transferred into the Treasury. Sarah Elliott, the chief executive of the National Council for Voluntary Organisations, said:

“This is the biggest shock to the sector since pandemic. Charities already juggling rising demand, escalating costs, and the falling funding cannot absorb an additional £1.4 billion in costs without drastic service cuts...This additional cost, for which there is no headroom in budgets to cover, will be devastating.”

I commend the hon. Member for securing this debate. In Northern Ireland, the effect on charities will range from £5,000 per year to £200,000 per year. The costs are extreme and incredibly worrying. Does the hon. Member agree that charities are the backbone of many local communities across the UK, as he said earlier in his speech, and that as such they deserve even more support? Does he feel, as I feel on behalf of charities in my constituency, that the change could ultimately be the straw that breaks the camel’s back, and that charities could well disappear?

I agree with both those points. Charities tell us that the change will be the straw that breaks the camel’s back for many. I know that because, immediately before entering Parliament, I worked for a nursing charity supporting dementia carers.

The Government know the pressure created by the national insurance contribution rise. They exempted the NHS because they knew the impact it would have on healthcare, but they ignored or failed to understand the contribution that charities make to health and social care.

I commend my hon. Friend for securing this debate. The Midlands Air Ambulance Charity, which serves my constituents, receives no Government funding whatsoever for its daily missions. It does not burden the NHS financially, yet it adds immense value to the healthcare sector. Does my hon. Friend agree that it is time the Treasury considered giving organisations and charities such as air ambulances the same exemption they are giving to NHS trusts, hospital trusts and NHS bodies?

I agree. Ultimately, the Government should exempt all charities from national insurance contribution rises. Another possibility, which would be much less beneficial, would be to target the exemption at health and social care provider charities, without which the NHS could not function, but I ask the Minister to expand the exemption to all charities, not just those in health and social care.

Shooting Star and Demelza House are two children’s cancer hospice charities that make a significant contribution to the national health service. Is it not absolutely ludicrous that money given for charitable purposes should effectively be siphoned off to the Treasury instead of being used to provide the support to children and their families for which it is intended?

I agree: of course it is ludicrous. This is charitable money—most of it is charitable donations—that is given to charities to provide valuable work, and the Treasury is taking it and putting it into the Government’s coffers. Some of these charities, such as those in my right hon. Friend’s constituency, are small charities doing valuable work and are the least able to afford to give money over to the national Government. It is therefore unsurprising that 7,000 charities have signed an open letter to the Chancellor. This is about not just the increase in national insurance contributions but the timing of it and the combination of factors.

I will make a little progress and then come back to the hon. Gentleman.

Most charities are suffering as they try to raise charitable funds, yet the Government have decided to take some of those charitable funds for themselves. For charities that support older people, such as Age UK, the simultaneous impact of the withdrawal of winter fuel payments has meant that more people are using their services, and at the same time the Government are taking money off them.

I give way to my right hon. Friend the Member for Beverley and Holderness (Graham Stuart).

I congratulate my hon. Friend on securing this important debate. We can see from the attendance on one side of the Chamber how important charities are to Opposition parties of all sorts. We are united in opposing the change, not least because those who are the most vulnerable, such as users of Citizens Advice, are likely to see services cut. There is an £88,000 impact just on the Citizens Advice service in Hull and East Riding. Does my hon. Friend agree that the Minister needs to go back to her colleagues and change direction? No one voted for a Labour Government to attack charities and the most vulnerable.

I agree that the Minister needs to go back and do that. That is why I secured the debate.

The chief executive of Crisis said:

“Increasing employers’ National Insurance contributions will have a dreadful impact on charities at a time when we are seeing unprecedented demand for our services.”

Some 75% of charities are reducing or considering withdrawing from public service delivery. Who will pick up that shortfall? In the worst case, no one will pick up where charities withdraw, or the Government and the public sector will have to, and I am fairly sure it will cost them more than £1.4 billion to do so. I prefer to put my trust in charities with experience in what they do, rather than the Government having to put emergency measures in place because charities are forced to withdraw. Some 61% of them are likely to cut staff.

The Government’s stated aim is not backed by their tax policy in three areas in particular: in health and social care, which we have already spoken much about; in poverty and homelessness; and for vulnerable groups.

On the hon. Member’s earlier point about Age UK, it estimates that just in my Horsham constituency it will cost £150,000 per year to cope with the changes and the extra charge. Age UK is not a business and cannot raise its prices; it can only cut its service. Does the hon. Member agree that when one in five pensioners are adjudged to be living in poverty, this is the wrong time for such a measure?