Employer National Insurance Contributions: Charities

Graham Stuart Excerpts

Tuesday 7th January 2025 Westminster Hall

[Joe Robertson]

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

[Graham Stuart (Beverley and Holderness) (Con)]

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.

[Joe Robertson]

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.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stephanie Peacock)]

It is a pleasure to serve under your chairship, Ms Vaz. I congratulate the hon. Member for Isle of Wight East (Joe Robertson) on securing this debate, and I thank Members from across the House for their contributions. As the Minister for Civil Society, I have seen at first hand the huge contribution that charities and voluntary groups make to our country; and as the MP for Barnsley South, by working directly with local groups, I have seen the impact that they have in my area.

As part of the autumn Budget, the Government took a number of difficult decisions on tax, welfare and spending to fix the public finances, fund public services and restore economic stability. In an open letter to the voluntary sector on this issue, the Chancellor stated that raising the rate of employer national insurance contributions was one of the most difficult decisions in the Budget. I will address the specific point around the change to national insurance alongside some of the questions and issues raised in the debate, before discussing the wider support that the Government provide to the sector.

The Government recognise the need to protect the smallest businesses and charities, which is why we have more than doubled the employment allowance, from £5,000 to £10,500. That means that more than half of employers, including charities with NI liabilities, will either gain or see no change next year. In addition, we are expanding the eligibility of the employment allowance by removing the £100,000 eligibility threshold to simplify and reform employer NI, so that all eligible employers now benefit. Almost all charities are eligible for the employment allowance, as outlined in the HMT guidance. The changes will mean that a small to medium-sized charity could employ up to four full-time workers on the national living wage and pay no employer NI, to give one example.

[Graham Stuart]

Does the Minister agree that if it turns out that it will cost the NHS more to bring in the changes than it will gain, as colleagues from across the House fear, then it would be worth reviewing them? I know that she is not personally responsible for the initiative.

[Stephanie Peacock]

As the right hon. Gentleman makes clear, I am not personally responsible for the specific policy, but I will reflect his point to the Treasury.

Employers, including charities, will still continue to benefit from employer NI reliefs, including for hiring those under 21 and apprentices under 25 where eligible. I am aware, however, of the concerns of the voluntary, community and social enterprise sector about the impact that the changes will have on their organisations. I acknowledge that the last few years have been difficult for voluntary and community sector organisations, many of which have seen a rise in demand for their services while dealing with increased financial pressures. After the last 14 years, where the state at every level has been cut back, more demand has been placed on charities. Indeed, my local authority saw some of the worst cuts in the country, despite being one of the areas of greatest need, so I completely appreciate the role that charities have played during that time.

The simple reality is that the situation cannot be reversed overnight. To grow our economy and our country, tough decisions have to be taken, and I appreciate that that is difficult.