A senior Jewish Labour peer has urged the government to reverse its decision to increase tax on charities, as the impact of the measure on care for society’s most vulnerable became clearer.
Research by the Nuffield Trust estimates the employer national insurance (NI) tax rise, when combined with rises in the national minimum wage, could cost charities as much as £2.8bn.
Jewish News spoke with several communal charities this week, who are each facing additional seven figure bills. And we’re highlighting the impact on good causes in other minority communities too.
Lord Levy, president of Jewish Care and Sense, says since the budget he has been inundated with concerns about the impact of the NI rise on charities.
“They now face having to overhaul annual budgets and potentially cut back on frontline services for some of the most vulnerable in society.
“There is no doubt the government faced a massive black hole, but such measures that risk these essential services – and the jobs of the heroes who provide them day in and day out – are profoundly disappointing.”
He added: “I’m urging ministers at every opportunity to introduce an exemption for the thousands of charities now facing an uncertain future.”
Rachel Reeves delivers budget
Concern is increasing over the NI rise introduced in the budget, given that it impacts charities as well as businesses. UK charities employ almost one million people and are already struggling with rising costs, growing demand and a fall in funding. Yet about one in four people in the UK relies on the social care services they provide.
The budget now looks poised to cost some of the community’s largest social care and charitable organisations millions in extra costs.
Jewish Care annnounced last week it expects an additional £1.1m hit annually while for Norwood that figure is £1m and £400,000 for Kisharon Langdon. The United Synagogue anticipates a 500,000 hit.
Richard Franklin, CEO of Kisharon Langdon, believes that the government knew exactly what it was doing when it announced the tax rise.
“The government took out the cost of exempting charities from their projections [based on follow-up reports by the Nuffield Trust and the Institute for Fiscal Studies].
“In my view it wasn’t a mistake and it appears they knew what they were doing, and they are reluctant to move their position,” he said. “It is hard to fathom that this administration has come up with a tax regime that penalises those with least broad shoulders. This tips everyone into operating deficits.”
Franklin continues: “I have a team looking at it and we will be very calm and considered about this and plan for all eventualities.
“The government might look at local authority allocation to mitigate this in part, but that approach is arguably a difficult one as [local authorities] have their own issues.”
Jewish Care CEO Daniel Carmel-Brown says the charity would now need to turn to the community to raise £20m before the end of this financial year to “continue doing all that we do today, and to avoid having to make some difficult choices”.
Michael Goldstein, president of the United Synagogue, which employs more than 800 people across its communities, nurseries, cemeteries, kashrut and support departments, adds: “The government must urgently grant an exemption for charities. If the government doesn’t reverse its decision, it is vulnerable people across the country who will inevitably pay the price.”
The impact of the ‘charity tax’ bombshell is being felt across all voluntary organisations in the UK, with many facing difficult choices in the months ahead.
Age UK director Caroline Abrahams said the impact of the NI rise would be “significant both on the national charity and on our local partners. We are hearing from our local partners and from other charities too it is the combination of the increase in the national minimum wage – which was higher than anticipated – plus the rise in employer NI contributions and the lowering of the salary floor at which they start to be payable that is hitting them hard”.
The impact of the ‘charity tax’ bombshell is being felt across all voluntary organisations in the UK, with many facing difficult choices in the months ahead
She added: “It would be a tragedy for the budget changes to lead to a reduction in the support charities are able to provide.”
Kanti Nagda, manager of the Sangat Advice Centre, which supports Asian and other minority communities on welfare benefits and housing, says: “We will have to cut back on services, reduce hours, and put activities on hold. Ultimately the people who need things the most will lose out. So we call on the government to reverse its decision. Reimbursing charities for this NI rise would be the most welcome thing.”
Hopscotch, a charity that works with women and their families from different ethnic backgrounds to improve their physical and mental health and wellbeing, says the tax increases will add at least £35,000 to their wage bills at a time when they can ill afford it.
CEO Benaifer Bhandari said: “Because of the language services we provide, councils lean on us for culturally appropriate support. Our services are in such need. More than we can provide. And the pressures on us with the NI rise just adds to that.” Cutting service provision is a last resort for Hopscotch, but Bhandari cannot rule it out.
She said: “We will need to dip into our designated reserves to cover these costs, which we set aside for redundancy pay for staff and care workers should the organisation need to close in an emergency. This hike is going to make a lot of charities question whether they can afford to keep existing.”
Revealing the true extent of the crisis, the Care Provider Alliance (CPA) this week warned the social care sector faces potential collapse, following a survey of 1,180 providers.
The study paints an alarming picture of broken Britain and a sector already stretched now facing “impossible choices”. The CPA report quotes one provider as saying: “We have made it through a global pandemic and cost of living crisis only to be shut down by the very government that we hoped would save us. This is not just about business viability – it’s about the lives of hundreds of thousands of vulnerable people who rely on these essential services.”
Even the UK’s largest charities are not immune. The UK Alzheimer’s Society says increased NI contributions will mean more of their supporters’ donations are taken up by additional tax
The CPA survey found 77 percent of organisations will have to draw on reserves, 64 percent will have to make staff redundant and one in five is planning to close its business entirely.
Prof Vic Rayner, CPA chair, said: “Without adequate support, we now know for certain that services will close, care providers will stop delivering public services, and care workers will lose their jobs. Critically, a huge number of people who rely on care and support will go without or see their lives deteriorate.”
Even the UK’s largest charities are not immune. The UK Alzheimer’s Society says increased NI contributions will mean more of their supporters’ donations are taken up by additional tax.
“This could impact on our ability to provide support for those who need it more than ever,” a spokesperson says. “The UK government must realise that charities are already working in a difficult and inflexible situation with rising demand and increasing costs. The NI rise will be a significant additional factor for us to contend with, while we support thousands of people affected by dementia.”
The charity tax impact is also expected to be felt in the education sector. Raisel Freedman, assistant director of PaJeS, the umbrella organisation for Jewish schools, said: “The increase in NI contributions is just one of several compounding financial pressures facing approximately 80 independent Jewish schools – who are all registered charities.
“With the simultaneous introduction of VAT on school fees, removal of business rates relief, and rising minimum wage requirements, these educational institutions are confronting a perfect storm of policy changes that threaten their financial viability.”
In a recent letter to the Independent newspaper, Claudia Mendoza, CEO of the Jewish Leadership Council, claimed that the tax rises will also impact the fight against antisemitism, saying it will “damage the essential work done by Jewish charities” and lead to contractions “across the whole sector, including all those charities who are fighting bravely against antisemitism”.
Mendoza added: “The chancellor must urgently consider an exemption from this tax rise for the charity sector. Without this, the services provided by British charities will be reduced – in some cases critically.”
So what next for our charities?
The National Council for Voluntary Organisations (NCVO) has seen more than 7,000 organisations already sign up to its open letter to Rachel Reeves calling for reimbursement of NI contributions for the voluntary sector.
The letter states: “The harsh reality is that many organisations may be forced to reduce staff, cut salaries, and most importantly, scale back services for the very people they strive to support.”
At the time of going to press the NCVO was still awaiting a Treasury response to its open letter.
However, responding to criticism of the budget, a Treasury spokesperson told Jewish News: “Our tax regime for charities, including exemption from paying business rates, is among the most generous anywhere in the world, with tax reliefs for charities and their donors worth just over £6bn for the tax year to April 2024.
“We have protected small charities and businesses by more than doubling the Employment Allowance to £10,500, meaning more than half of them with NI liabilities either gain or see no change next year. Charities will still be able to claim employer NICs reliefs where eligible and are still exempt from business rates.”
The chancellor said the rise in NI overall would raise £25bn a year by the end of the parliament. The government also points to the extra £600m being put into social care services in government grant funding next year, announced by the chancellor.
• Editorial comment, p18
