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.
Briefing to House of Lords: National Insurance Contributions Bill
Voluntary sector costs are climbing, funding is falling, and demand for services continues to increase. Similarly, 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. As a result, eight out of ten organisations report that financial difficulties rank among their most significant challenges.
In the most recent Scottish Third Sector Tracker, 94% of organisations reported experiencing some sort of challenge over the last four months.
You can find out more about the voluntary sector in SCVO’s State of the sector statistics.
These pressures that will be exacerbated by the Chancellors plans to increase employers’ National Insurance Contributions (NICs), announced in the Chancellor’s Autumn Budget.
The voluntary sector is a significant economic actor, employing over 1 million people across the UK (136,000 people in Scotland - 5% of Scotland’s workforce). Our sector is a key partner in the delivery 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.
This issue will impact all voluntary organisations that are medium or large employers not only those in receipt of public sector funding. Organisations reliant on fundraised income, who are also key employers- for example the Scottish SPCA- will struggle to recoup these additional costs.
The increases to employers’ National Insurance Contributions (NICs) announced by the Chancellor will, therefore, significantly impact medium and large voluntary sector employers and the services and support they provide, as SCVO shared with the Chancellor ahead of the Budget.
SCVO estimates that changes to employer NICs will cost voluntary sector employers in Scotland £75 million per year, plus inflation. Some organisations face additional costs of hundreds of thousands of pounds. This puts essential services, jobs, and organisations at risk. Ultimately, it is the people and communities who rely on voluntary sector services who will feel the impact of these changes.
Ahead of the National Insurance Contributions (Secondary Class 1 Contributions) Bill coming before the House of Lords, SCVO is calling for Peers to:
- Support measures that would ensure voluntary organisations are not out of pocket - through exemption, remuneration, or other means.
- Ensure grants and contracts awarded by the UK government, their agencies, and other public bodies, cover the full costs of employing staff. That includes not just increased employer NICs costs, but payment of at least the Real Living Wage, and inflation-based uplifts. Devolved administrations should also be resourced to cover these costs.
As the scale of the costs involved for medium and large voluntary sector employers begins to be understood, it is imperative that the Chancellor changes course.
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. |
Case-study
| Turning Point Scotland is a large social care provider working across 18 local authority areas. Supporting between 8,000 and 12,000 people at any one time. We employ 1,200 people, and have an annual turnover of £44 million. We are entirely commissioned to deliver public services on behalf of Local Authorities and Scottish Government. The National Insurance increase will cost us £1.1 million per year; £274,000 in relation to the rise in employer NI contributions, £778,000 associated with the lowering of the NIC threshold. This equates to a 2.7% increase to our payroll costs. Every service that we operate will go into budgetary deficit – none of our services will receive enough money to cover the costs of providing that service. One service we provide is already looking at a £60,000 deficit for next year – with these changes that deficit will become £160,000 Without a radical change, none of our services will be financially viable. Many will face closure in the very near future. If that change does not come from the UK or Scottish Government, we will need to make those changes with our service commissioners– what will be lost? Will we have to reduce the number of staff? Will we have to disinvest in training, development and support? Will we have to cut pay? Every cut will impact on the number of people we can support, the quality of the support we provide, the attraction and retention of our workforce, and the safety and viability of our services We consider ourselves a financially healthy organisation in terms of both cash and reserves, but without action to address the impact of these changes, we will not survive in our current state. We risk losing many of the services that we deliver, and we know that our sister organisations in the social care sector are facing the same, if not a worse outlook. The impact on Scotland’s social care system and the people who rely on it cannot be overstated. |
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. |
Case-study
| C-Change Scotland employs around 235 people, with a projected turnover of approximately £8m. The increase in employers NI will mean £183k additional costs. Unless a decision is made to mitigate the impact of the budget on the not-for-profit sector, the organisation will need to find that money from somewhere and we need to consider where. C-Change is a registered Living Wage employer committed to fair work practices. The challenges arising from budget decisions require us to consider whether a cost-of-living salary increase for staff in April 2025 is affordable; the increase to the Living Wage is 5%. We are a charity, but we deliver public services on behalf of local authorities. We don’t make a profit. Surplus, when there is any, goes back into the charity. These increases in costs are simply unaffordable: hard pressed organisations like C-Change Scotland will simply not remain viable. We ask you to consider the detrimental effect on those in receipt of social care support and their families and, also, those who work to deliver these much needed support services. |
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’ National Insurance 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.
Ahead of the Bill coming before the House of Lords, SCVO is calling for Scottish Lords to show their support for the voluntary sector, by supporting measures that would ensure voluntary organisations are not out of pocket, through exemption, remuneration, or other means.
We ask that grants and contracts awarded by the UK government, their agencies, and other public bodies, cover the full costs of employing staff. That includes not just increased employer NICs costs, but payment of at least the Real Living Wage, and inflation-based uplifts. Devolved administrations should also be resourced to cover these costs.
Additional information
Letter to Scottish MPs: National Insurance Contributions Bill
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
