One in three disability charities are poised to hand back government contracts for vital services due to a hike in National Insurance contributions and rising staff wages, research reveals.
The changs, recently announced in the autumn budget, will result in a staggering £266 million funding shortfall among charities and impact many thousands of disabled people, the study shows.
Under the new plan, the rate that employers pay in contributions will rise from 13.8 percent to 15 percent on a worker’s earnings above £175 from April. The threshold at which employers start paying the tax on each employee’s salary will be reduced from £9,100 per year to £5,000. The national minimum wage is also set to increase to £12.21 an hour for over 21’s.
New research, commissioned by the Voluntary Organisations Disability Group – VODG – which represents 100 charities in England, shows nearly sixty percent of charities forecast they will be in deficit by March 2025, with many already considering drastic measures such as closures, cuts to services, staff cuts, pay freezes, or reductions in hours to cope with escalating costs.
Charities such as SeeAbility, which supports people with learning disabilities, autism, and sight loss, are facing the brunt of these financial challenges. With nearly 1,000 staff, CEO Lisa Hopkins warns that her charity cannot absorb the additional costs.
“Disabled people will go without support, with devastating consequences,” she said. “Social care is not a drain on the system — it’s a lifeline. The government must act now to prevent this crisis from spiralling further.”
John Heritage, CEO of David Lewis, a charity providing care for people with complex needs, revealed its annual running costs could increase by a massive £1 million due to the changes.
He said: “The government’s plans are a direct threat to the services we provide and the vulnerable people we care for. If we cannot afford to run these services, who will?”
This funding shortfall also impacts families of disabled people who rely on the help of charities. Tyler, who sought the support of a mental health and homelessness charity, Look Ahead, said: “Without the vital support Look Ahead provided me, I would have ended up on the streets of London. Look ahead, stopped that from becoming a reality…It is vital these services stay open, and I implore the government to reconsider its decision for people like myself.”
Dr Rhidian Hughes, Chief Executive of the VODG, warned without urgent intervention, disability charities may be forced to close altogether. “These increases in NICs and wages are unsustainable without proper funding. The government must either exempt charities from these costs or provide protected funding to ensure that services for disabled people don’t disappear.”
The government has allocated £680 million for social care in its latest budget, but experts argue this falls far short of the £2.8 billion needed to sustain the sector. “Unless these costs are fully covered, services will shrink or shut down,” Dr. Hughes warns.
The charity sector employs 1 million people and delivers approximately £17bn of services a year in areas such as social care, addiction, health, homelessness and hospice care. Charities estimate they face a total extra bill of £1.4bn as a result of the changes.
Health minister Karin Smyth has stressed the Government “understood the pressures and the precarious situation that many have been left in after 14 years of the last Government”.
She added: “We are willing and keen to talk to representatives” from charities. She added: “We are going through the process of the allocations.”
