The Scottish Council for Voluntary Organisations is the membership organisation for Scotland's charities, voluntary organisations and social enterprises. Charity registered in Scotland SC003558. Registered office Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh EH3 6BB.
SCVO Briefing Scottish Government debate: Impact of National Insurance Increase on Public Services
Summary
The voluntary sector continues to face unprecedented challenges. Voluntary sector costs are climbing, funding falling, and demand for services continuing to increase, as a result, eight out of ten organisations report that financial difficulties rank among their most significant challenges.
These pressures will be exacerbated by the changes to employers’ National Insurance Contributions (NICs) announced in the Chancellor’s Autumn Budget, which will impact on medium and large voluntary sector employers across Scotland and the rest of the UK.
The voluntary sector is a significant employer, employing around 133,000 people in Scotland - 5% of Scotland’s workforce. The voluntary sector delivers vital public services – like social care and youth work, as well as a host of essential services that people and communities across Scotland rely on.
SCVO estimates that these changes will cost voluntary sector employers in Scotland £75 million per year, plus inflation.
These additional costs put our sector’s essential services, jobs, and organisations at risk.
As the scale of the costs involved for medium and large voluntary sector employers begin to be understood, SCVO is calling for:
- The UK and Scottish Governments to recognise the sector as a significant employer.
- The Chancellor to offer the sector parity with public sector employers, who will be reimbursed for additional employer NICs costs.
- The Chancellor and Scottish Government to ensure grants and contracts they, their agencies, and other public bodies award, cover the full costs of employing staff, including at least the Real Living Wage, increased NICs costs, and inflation-based uplifts on par with those offered to public sector staff.
Background
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 increases to employers’ National Insurance Contributions (NICs) announced by the Chancellor will, therefore, have a significant impact on medium and large voluntary sector employers, as SCVO shared with the Chancellor ahead of the Budget.
It is widely understood that Scotland’s voluntary sector is facing unprecedented challenges. Years of underfunding and poor funding practices, and crises such as the pandemic, and the cost-of-living crisis have put the voluntary sector under increasing pressure, exacerbating financial and operational challenges.
Voluntary sector costs are climbing, funding falling, and demand for services continuing to increase, as a result, eight out of ten organisations report that financial difficulties rank among their most significant challenges.
The most recent Third Sector Tracker found that in April, 62% of organisations believed that rising costs had affected the ability to deliver core services or activities since December 2023.
These pressures will be exacerbated by changes to employers’ National Insurance Contributions (NICs) announced in the Chancellor’s Autumn Budget, which will impact medium and large voluntary sector employers across Scotland and the rest of the UK.
SCVO estimates that these changes will cost voluntary sector employers in Scotland £75 million per year, plus inflation.
As the scale of the costs involved for medium and large voluntary sector employers begins to be understood, it is imperative that the Chancellor offers the sector parity with the public sector, whom the Chancellor plans to reimburse for additional employers’ National Insurance Contributions costs.
Our sector is a key partner in the delivery of essential services and support for people and communities across Scotland through public sector grants and contracts, including essential public services like youth work and social care.
Case-study
| Four Square (Scotland) is a local Edinburgh charity supporting people who face homelessness. They employ around 120 people, and their turnover is less than £4m. They deliver public services on behalf of the local authority. Four Square estimates that the increase in employers’ NI will mean £67k additional costs to them. They have very limited options for finding the money for those unexpected costs and are considering whether they can afford a cost-of-living salary increase for staff in April 2025; or whether they need to cut posts. |
Our sector’s essential role in public service delivery has not been recognised by the Chancellor. Voluntary sector providers can and should have parity with the public sector by being included in any scheme to reimburse increased NICs costs.
The proposed NICs changes will also impact voluntary organisations not in receipt of public funding, whose services are also essential to the people and communities they support across Scotland.
Case-study
| The Scottish SPCA, Scotland’s oldest and largest animal welfare charity, estimates that the sudden cost they will face will be £400,000 per year. The 185 year old charity rescues, rehabilitates and rehomes domestic and farmed animals across Scotland, rehabilitates and releases wild animals, works in communities providing pet food and veterinary support to those in need plus a wealth of advice and guidance, and is funded entirely by voluntary donations with no Government funding, despite having statutory powers. It responded to an average of 209 reports of an animal in need, every single day last year, and has seen demand for its services steadily increase, with the charity recently launching an urgent fundraising appeal after the largest single influx of dogs in their 185-year history, rescued from squalor, neglect and abuse across Scotland. To put the additional National Insurance cost into context, £400,000 is almost double the cost of feeding all the animals in their care across Scotland for a year. It’s the cost of running one of their mid-sized Animal Rescue and Rehoming Centres, for almost a year. It’s the cost of running their Animal Helpline, for more than half the year. It’s the cost of operating their nationwide frontline animal rescue team for three months of the year. |
SCVO welcomes the First Minister’s recognition that the Chancellor’s intention to increase employers’ National Insurance Contributions will have a significant impact on the voluntary sector in Scotland and his calls for support for the sector. As set out in our letter to the First Minister, commitments are also needed from Scottish Government to ensure that, come what may, grants and contracts awarded by the Scottish Government and its agencies, and other public bodies, are uplifted to meet the costs associated with increased National Insurance costs for voluntary organisations, as well as inflationary pressures.
Similarly, while SCVO welcomes 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- neither the Chancellor or the First Minister has recognised the need to support and resource voluntary organisations with these increases or their wider Fair Work ambitions.
Both the First Minister and the Chancellor must ensure grants and contracts they, their agencies, and other public bodies award cover the full costs of employing staff, including at least the Real Living Wage, increased NICs costs, and inflation-based uplifts on par with those offered to public sector staff.
SCVO looks forward to seeing progress on these, and the Scottish Government’s wider Fair Funding commitments, in the upcoming Scottish Budget, and the ongoing Autumn Budget process.
Conclusion
Scotland’s voluntary sector is a significant employer and a partner in the delivery of public services.
Our sector and the essential services and support we provide make a significant contribution to the wider economy, and support people and communities across Scotland.
The increased costs of employers’ NI contributions are a significant additional cost to medium and large voluntary organisations across Scotland, at a time when the sector and the essential services and support we provide are under pressure.
Fair Funding can and should cover the full costs of employing staff.
To recognise and support our sector’s significant contribution, the Chancellor must ensure the voluntary sector has parity with public sector employers who will be reimbursed for additional employer NICs costs.
The Chancellor and Scottish Government must ensure grants and contracts they, their agencies, and other public bodies award cover the full costs of employing staff, including at least the Real Living Wage, increased NICs costs, and inflation-based uplifts on par with those offered to public sector staff.
Additional information
Letter to Scottish MPs - UK Budget: Impact of NI changes on charities in your constituency
SCVO, NCVO, NICVA, and WcVA letter to Rachel Reeves, Chancellor of the Exchequer: Autumn Budget 2024 – employers’ National Insurance contributions
Letter to Scottish MPs: UK Budget: Support the voluntary sector in your constituency
SCVO letter to Rachel Reeves, Chancellor of the Exchequer
