0:04 AM, 19th December 2024, About 3 hours ago
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Homeless charities are warning of the “final nail in the coffin” due to the Chancellor’s national insurance hike in the Budget.
Homeless Link, along with more than 100 other charities, has written to Chancellor Rachel Reeves, warning that changes to National Insurance could cost homelessness services between £50m and £60m per year.
In the Budget, Chancellor Reeves announced a rise in National Insurance contributions from 13.8% to 15% for employers, from April 2025.
She also lowered the £9,100 threshold at which employers start paying National Insurance on employees’ earnings to £5,000.
However, since the warning was issued, Angela Rayner has announced that councils in England will receive almost £1bn next year to address homelessness.
The deputy prime minister pledged to “break the cycle of spiralling homelessness and get back on track to ending it for good”.
That promise of cash doesn’t help the sector deal with the National Insurance rise which Rick Henderson, the chief executive of Homeless Link, warns will cause chaos for the homeless sector.
He said: “Homelessness services are already under enormous pressure from overstretched funding, and increasing demand for services as the number of people who are facing homelessness is skyrocketing. Whilst extra money was allocated in the budget it is unclear whether this will reach frontline services or disappear into the temporary accommodation funding black hole.
“I fear that this National Insurance rise could be the nail in the coffin for many service providers. Some are facing hundreds of thousands of pounds in additional tax bills. The public sector is getting a rebate and we want to make sure that this is also made available for vital homelessness services.
“I have rarely seen the sector as angry and frightened as they are by this proposal. It is a very real threat that could impact thousands of people who are currently homeless or threatened with homelessness, leaving them without support. 110 organisations of every shape and size and from every corner of the country have signed this letter. We need action now.”
A number of homeless services are not-for-profit organisations and many service contracts across the homelessness sector have fallen well behind the cost of delivering services.
The letter to the Chancellor says: “Most existing contracts were set in April 2022, before the cost of living crisis caused rapid inflation to the cost of service delivery.
“Many services are running deficit budgets and relying on reserves to meet essential costs.”
The charity reveals that 36% of accommodation providers have reduced services in response to the increased cost of living.
Homeless Link is urging the government and local authorities to address this crisis by increasing the value of grants and contracts from 2025-26 onwards to cover rising costs.
In response a government spokesperson told Inside Housing: “This Budget took the tough choices needed to fix the foundations and restore economic stability.
“Our tax regime for charities, including exemption from paying business rates, is among the most generous anywhere in the world, with tax relief 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 [National Insurance contribution (NIC)] liabilities either gain or see no change next year.
“Charities will still be able to claim employer NIC relief, including where eligible, and are still exempt from business rates.”
