Charities ‘penalised’ by Rachel Reeves’ taxes
Chancellor Rachel Reeves’ hike to employers’ national insurance contributions (NICs) has “penalised” staff at charities up and down the UK, a new study has suggested.
Rachel Reeves has reportedly suggested the £20bn tax raid on mid-sized firms was “low hanging fruit” to provide extra funding for the NHS and schools.
But the collateral damage from the taxes has spread to organisations working in healthcare and aid, according to global insurance group Howden.
The increase in the rate from 13.8 per cent to 15 per cent, along with the lowering of salary threshold, has imposed “unaffordable costs” on charities which ensure finances are kept in check.
Around half of charities said they were at risk of closing in 2025 due to cost pressures, a significant increase from the 43 per cent figure seen two years ago.
Nearly one in three charities surveyed by the insurance group put higher employment taxes at the top of their list of concerns.
Higher costs have come alongside a fall in donations over recent years due to pressures in the cost of living faced by Brits.
Lower income has forced one in five charities to freeze or cut salaries, with others choosing to downsize office space and switch to WFH, according to the survey of over 300 bosses at UK charities.
Mark Fisher, director of Howden’s not-for-profit division said charities were “stretched thin” by rising costs and smaller donations.
“Unlike businesses, they can’t pass those costs on,” Fisher said.
“It’s not just about numbers on a balance sheet. It’s about whether a domestic abuse survivor gets help, whether a disabled person can access transport, whether a food bank stays open.
“Charities are not just part of the economy: they’re part of the social fabric . We need to ensure they’re not penalised for employing people to do good.”
Reeves’ damage to UK industries
The sectors to have been hardest hit by the higher taxes, which came into effect in April this year, include hospitality and retail.
Figures from the Office for National Statistics suggested that some 69,000 jobs in hospitality have been lost since last year’s Autumn Budget, emptying pubs, restaurants and hotels of staff.
UKHospitality chair Kate Nicholls has warned that a total of 200,000 people could lose their jobs as a result of the tax hikes.
Employment platforms have separately warned that young adults leaving university will be most affected, with a sharp downturn in job postings for entry level work.
Unemployment has jumped by 0.2 percentage points in the last few months, a trend that has kept the likes of Bank of England Governor Andrew Bailey on edge.
The government’s own plans to boost employment have also fallen apart, with welfare reforms aimed at getting British people into the labour market being put aside after a revolt from Labour Party MPs.
Rachel Reeves will be hoping that the City can help the UK economy and wider labour market get back on its feet through boosting investment in jobs.
Her speech at Mansion House next week is set to outline how financial leaders might benefit from reforms to rulebooks, markets and savings.