News Detail
Dec 16, 2024
One in three disability charities considering handing back local government contracts
One in three disability charities are considering handing back local authorities contracts as they face an estimated £266m budget shortfall due to increases in National Insurance and the national minimum wage, according to new figures.
Research among members of the Voluntary Organisations Disability Group found disability charities are likely to face £266m of additional expenditure as a result of the employer NI hike and minimum wage increases announced in the Budget.
This shortfall equates to nearly 7 per cent of these charities’ income, the analysis suggests.
The research, carried out by the consultancy firm Cordis Bright and commissioned by the VODG, found that more than 60 per cent of disability charities expect to be in a financial deficit as early as March.
The survey of 54 charities found that one in three disability charities are poised to hand back local government contracts as a result of these financial challenges.
The report said: “Unless local authorities are able to increase funding to a level which covers this additional cost then organisations will have very limited options for how they respond.
“In most cases they will need to hand back all contracts which fail to meet a minimum income threshold as to retain them would mean the organisation subsidising the state by using its own money to fund public services.”
Many organisations surveyed said they will be forced to mitigate soaring wage bills by making redundancies, cutting hours or implementing a pay freeze for existing staff unless the government takes urgent action to fully fund or exempt charities from these extra costs, the report adds.
Nearly a quarter of respondents said staff cuts were inevitable, while 18 per cent said they were reluctantly considering a pay freeze or reduction in the hourly rate of staff pay.
Of the respondents, 20 per cent said they may need to close some of the services their charity funds.
The National Council for Voluntary Organisations previously estimated the increase in employer National Insurance contributions could cost the UK voluntary sector £1.4bn a year.
Rhidian Hughes, chief executive of VODG, said: “The recent Budget announcements on increased employer National Insurance contributions and the National Living Wage present significant challenges for disability services.
“Third-sector providers of frontline services have faced years of underfunding, and these changes are set to push charities to the brink.”
Hughes said: “Without an exemption, or protected funding to cover the commitments being introduced by government, it will mean that services for disabled people will at best shrink, and at worst close.”