Third Sector Dumfries and Galloway’s Chief Executive Officer has joined national criticism of the Chancellor’s response to a call for a third sector exemption to planned increases in National Insurance (NI) contributions.
Alan Webb shared his disappointment after Rachel Reeves confirmed there would be no mitigations provided to deal with the increased cost.
Both he and the Scottish Council for Voluntary Organisations (SCVO) said the decision showed a misunderstanding of the role and impact of the whole third sector.
Thousands of charities and voluntary organisations signed an open letter calling for action on the planned increase to employer NI contributions.
Employers will pay NI at a rate of 15 per cent on salaries above £5,000 from April, up from 13.8 per cent on salaries above £9,100. The Employment Allowance that employers can claim will increase from £5,000 up to £10,500.
The Chancellor’s response to the open letter can be read here.
She said the government had taken a number of difficult but necessary decisions on tax, welfare, and spending and had recognised the need to protect the smallest businesses and charities by more than doubling the Employment Allowance.
TSDG’s CEO said eyes would now turn to the Scottish Government budget, however any mitigations that might be agreed were likely to be limited to those directly funded – while the majority of the sector was not funded by Government.
“Whilst there is attention to the services provided by third sector on behalf of public bodies – and we will ask those bodies to consider the NI impact in their upcoming contracts and grants – we still believe the most effective way of protecting the whole sector from costs is for a cap at source, demonstrating how much we value their relationships and impact for people and places,” the CEO said.
Asking the sector to contribute to investment in public services was counter to the reality on the ground, in communities across Dumfries and Galloway, where thousands of organisations and groups were working with great impact, often without even being seen by government.
“We will continue to make that case,” he said.
This week, SCVO warned that their estimates showed the changes would cost the voluntary sector in Scotland as a whole around £75 million.
In their statement, SCVO’s head of policy and research, Kirsten Hogg, said: “The chancellor’s decision not to support voluntary sector employers with increasing National Insurance contributions is shortsighted, and belies a lack of understanding of our essential sector. We will continue to push Westminster to put in place mitigations, in recognition of the very significant impact that this will have on some voluntary organisations, and on our sector’s ability to operate sustainably.
“A failure on the chancellor’s part to develop a UK-wide solution to this problem will put significant strain on the environment in which Scottish voluntary organisations operate. As part of our ongoing Fair Funding work we will continue to call on all funders to cover the core costs of the organisations they fund, including the any increase to NICs. This will include seeking to influence the Scottish Budget next week, but there will also be significant financial implications for local authorities, IJBs and independent funders.
“We cannot afford to throw this issue around like a political hot potato. If a solution cannot be found it is voluntary organisations, their staff and the communities they serve who will suffer. We must not allow that to happen.”