John Swinney, Scotland’s First Minister, has urged the Chancellor of the Exchequer to make sure changes to National Insurance employer contributions are fully funded, in a letter backed by nearly 50 voluntary organisations.

The letter, which was jointly signed by Swinney and Shona Morrison, president of the Convention of Scottish Local Authorities, calls for funding to fully cover the additional NI costs faced by Scottish public sector and voluntary organisations.

It has also been signed by 48 voluntary organisations, including the Scottish Council for Voluntary Organisations, Scottish Hospices Leadership Group, Rape Crisis Scotland, The Promise, Early Years Scotland and the Scottish Childminding Association.

The letter to Rachel Reeves says that funding provided to the Scottish government “must fully cover the additional costs of employer National Insurance contributions and extend to the full range of organisations delivering public services, who face increased costs as a result of this change”.

Swinney and Morrison say: “Our model for delivery of public services in Scotland is further reliant upon a range of private and third sector providers, which are critical to our health and social care provision and early learning and childcare in particular.”

Although information on the overall cost is limited, they estimate that the changes to NI contributions could increase Scotland’s public service costs to more than £700m, when taking into account contracted and commissioned services.

The letter also expresses “grave concern” for Scotland’s voluntary organisations, saying: “We are also deeply concerned about the impact for charitable organisations given the valuable role they play across our communities.

“There is a real risk that these costs will see employers unable to award meaningful pay rises, retain staff or even continue to operate. I am sure you would agree that would be an unacceptable outcome.”

The letter says that Scotland’s voluntary organisations will face additional costs of £75m a year plus wider inflation, according to estimates from the SCVO.

“We ask you therefore to consider carefully the case for taking an actual costs approach to the additional funding to be provided, and to confirm this before the final stages of the Scottish Budget to allow us to plan appropriately. 

“The impact for our communities and for the effective management of public finances will otherwise be highly damaging.”

In a comment, Swinney said: “I would like to thank all the public and voluntary sector organisations who have come together to call in a unified voice for this decision to be reconsidered.

“We are disappointed that the UK government did not engage with the Scottish government on the change to employers’ National Insurance contributions and we are concerned about the additional pressure it places on all employers.”

Swinney said the Scottish government will “continue to press the UK government to raise our deep concern about the implications of the increase to employer National Insurance contributions for organisations across Scotland, and the risk to the vital services they provide if these additional costs are not fully funded”.