National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Porter of Fulwood Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Baroness Porter of Fulwood (Con)]

My Lords, as we have now heard numerous times this evening, the changes within this Bill will have a devastating impact on charities, the most vulnerable people in our society and the social fabric of this country.

There are over 170,000 registered charities in the UK, and many more that are not registered. Charities in this country employ somewhere around 1 million people, so the effect of this Bill on them will be hugely significant. The National Council for Voluntary Organisations has sent the Chancellor an open letter, signed by more than 7,000 charities, estimating that the changes will cost the sector around £1.4 billion. The short-term costs of a reduced charitable sector will be felt most immediately by those involved directly with charities. The downstream impacts longer term will be even more far-reaching, affecting everyone, undermining social cohesion and weakening our communities.

It is unacceptable that a change of this magnitude is being implemented with so little warning. The Labour Party made a manifesto commitment merely months ago not to raise national insurance rates, yet here we are with these radical changes due to come in from April—this was entirely unexpected.

Consider for a moment the senior execs of charities, large and small, suddenly facing such a dramatic challenge. Over time, it may be that contracts and grants can be adjusted and philanthropists encouraged to give more to make up some of the shortfall, but for now there is no time for that. The hard choices charities are confronting involve reducing staffing and cutting the services they provide; that is the reality of the situation. What charities deliver is not a “nice to have”; just how integral charities are can be seen by how deeply enmeshed they are in almost every area of our public services. More than 10,000 voluntary, community and social enterprise organisations contract to government each year, and around 70% of those contracts are from local government. There is barely a service that charities are not involved in. Whether it is helping to support those affected by domestic violence, drug and alcohol addiction, mental health issues or homelessness, or those with educational or training needs, charities are there at a local level, nimble and able to respond in a way that only they can, wrapping around what is needed within their locality.

A survey in October by the Local Government Association showed the dire financial picture in many local councils, with one in four in England saying it is likely to have to apply for emergency government bailout agreements to stave off bankruptcy in the next two financial years. At a national level, the picture is similar. The Government are releasing thousands of people early from prisons, many into the care of a Probation Service that is already under tremendous pressure. The needs of many of these former inmates are acute: they require housing support, mental health treatment, training, support to find work and more. According to the Ministry of Justice, 76% of current commissioned rehabilitation service contracts are led by voluntary, community or social enterprise organisations. How will these organisations cope, caught between the twin pressures of increased demand and increased costs?

Charities provide a structure through all areas of life that much else hangs off and depends on. They have a unique level of local and specialist knowledge, care and commitment, and the connections and social capital they generate through the commitment of philanthropists, volunteers and those working in the sector quite simply would not exist without them; the role they fulfil cannot be replicated. The Bill moves entirely in the wrong direction. It threatens to weaken further the charitable sector in this country at a time when we should be doing everything we can to strengthen it. Instead of placing completely unrealistic tax burdens on charities, the Government should look at what they can do to help them: match funding; helping smaller charities engage with contracting and grant processes; facilitating more clusters, best practice sharing and incubators; making it easier to volunteer; and the like. I urge the Government to think again on this Bill, given how grave the impact of continuing with it in its current form will be on many of the most vulnerable in our society.